Endangered Sector

The story of how Malaysia obtained palm seedlings from Nigeria in the 1960s to kick off its palm oil industry is well known. But whereas Nigeria can still not earn a cent in exports from the advantage, Malaysia has gone ahead to establish itself as not only the world’s leading producer and exporter of palm oil, what it earns annually from the trade is higher than what Nigeria garners from its crude oil exports, according to official records. The three Asean Tigers of Indonesia, Malaysia and Singapore are today not only industrialised countries, they are kilometres ahead of Nigeria in gross national product, quality of life, poverty level, life span and technological advancement.

Since the Nigerian manufacturing environment got discoloured from the 1980s, rarely one international monitor has painted a favourable picture of the industrial climate. The Manufacturers Association of Nigeria once told a story of a group of American investors who visited the country in 1982 with a view to exploring the possibility of establishing manufacturing concerns. After the visit, the Americans reported: “Business operations in Nigeria can be exceedingly difficult. The climate, inadequate infrastructure, inefficiency and government regulations can drive even the most even-tempered executive to distraction. Manufacturing in Nigeria is extremely difficult, productivity is low, transport unreliable, infrastructure is not adequate, import of essential inputs are problematic and government bureaucracy is cumbersome.”

Banjoko was emphatic there has been no improvement in the situation. “Our infrastructure are still in bad shape, the level of corruption has multiplied, government bureaucracy is still with us, the transport system is still unreliable, port congestion is more frequent these days and the security concern has assumed a more frightening dimension with recent kidnapping episodes,” he said. The professor wondered how manufacturing activities can thrive in Nigeria and the sector would be able to employ and create wealth in the face of such unattractive and uncompetitive investment climate. He particularly cited how government’s policy reversal ruined Dunlop Nigeria plc, once Nigeria’s market leader in tyre manufacturing. Dunlop had been encouraged in 2005 to expand its radial truck tyre production by government’s duty of 40 per cent on imported radial truck tyre. The policy was to discourage importation of the product and make it an unattractive venture.

Inspired by the policy, Dunlop went to the capital market to raise N8 billion which it invested in expanding its heavy radial truck tyre plant. The tyre manufacturers had hardly finished the project when government reviewed the duty on imported radial truck tyres downward from 40 per cent to 10 per cent. That policy favoured importation of the product to the detriment of local production - and, what with debts, prohibitive cost of production and other problems, it contributed to effective finishing off of Dunlop Nigeria plc. The company has since redirected its line of business away from tyre manufacturing.

There have also been policy reversals by government in sales and cancellation of many public sector businesses in sectors like insurance, oil and telecommunications. Banjoko mentioned the sale, cancellation and later reinstatement of NICON Insurance; constant sale and cancellation of NITEL; awards and reversals of oil blocs and sale and cancellation of refineries and steel companies. Such somersaults, the speaker said, do not allow stability in industrial initiatives. Beside hostile policies, another clog in the wheel of growth of manufacturing in Nigeria that Banjoko mentioned are the numerous taxes and levies that all tiers of government impose on manufacturing concerns. A major problem that has stultified manufacturing growth is constant power outage. Many big companies like Michelin Tyre Company, Nestle, Cadbury and Unilever have shifted a greater part of their operations to neghbouring towns like Ghana because Nigeria cannot supply the constant electricity required to guarantee smooth operations. From their new operational centres, the companies import their products into Nigeria. More companies have closed down completely.

Banjoko took a deep look at the future of manufacturing and delivered a frightening forecast. “Unless the harsh and hostile business environments are reversed,” he warned, “decay in infrastructure rectified, many more companies would fold up and more would relocate their businesses to neighbouring countries, a situation that is already posing a threat of de-industrialisation of this country.” The professor listed certain “hard facts about some emerging and distressful economic realities.” One of the facts is the high cost of production which is driving many manufacturers out of business and is likely to get even higher in the coming months. This deduction emanated from the fact that the projected inflation figure of 8.2 per cent for 2009 had already hit 16 per cent by February because of the massive naira devaluation. “The already stressed manufacturing sector is going to be further hard hit,” he warned.

Nigeria’s continued dependence on oil to the neglect of its agricultural and manufacturing sectors is deemed dangerous. Moreover, the lecturer frowned, banks that are supposed to provide funds for the revitalisation of the ailing manufacturing companies are unwilling to invest their funds in a distressed sector. Rather, they will readily provide funds for religious organisations to build cathedrals and to importers or companies in the service sector whose contributions to the economy, and to job creation specifically, pale into insignificance compared with what the real sector can offer.

Banjoko proferred some solutions he believed will steer Nigeria aright if faithfully implemented. There is need, he said, to have a re-think, re-invent the wheels and by so doing run both government and industry as an enterprise that must succeed and be made profitable. Thus, as an entrepreneur that must succeed, the government must have a business strategy. “This is a prerequisite for any meaningful development in Nigeria. For too long, we have run our economy in a lackadaisical manner and the consequence is our current plight. There has been a lack of focus and direction. There have been massive corruption and infrastructural decay, electoral malpractice, overdependence on oil, insecurity of lives and property and now a crumbling manufacturing sector,” he stated.

He advised government to recognise the manufacturing sector as a major tool for sustainable growth and development and accord it due regard and priority in the scheme of things. To this end, he remarked, infrastructural, social and political constraints that obstruct the realisation of the full potentials of the manufacturing sector must be removed. “There is need for massive investment in upgrading our state of infrastructure, especially power, rail, ports, etc. The case of electricity supply is very pathetic. Inadequate supply of power has driven many companies underground. It has scared away many potential investors, both foreign and local. Without regular and interrupted power supply, not much can be achieved…The spate of policy reversals must be halted and replaced with stable and credible policies and programmes that would instill confidence in investors and encourage unrestricted inflow of foreign capital,” he advocated.