‘Government does not have any reason doing business’

Victor Eburajolo is a lawyer by training. He has equally served as president and Chairman of Council, Chartered Institute of Personnel Management of Nigeria. He is also a member and an alumnus of the National Institute for Policy and Strategic Studies (NIPSS), Kuru, Plateau State. He spoke to GREGORY AUSTIN NWAKUNOR on challenges of surviving a harsh business terrain like that of Nigeria and why it will be difficult to revive dead textile mills in the country.

This afternoon, Victor Eburojalo is busy leafing through different files on his table. As the deputy managing director, Kewalram/Chanrai Group of Companies, he is responsible for day-to-day management of the organisation. In spite of the economic stress all around, the man looked relaxed.

You wonder how the Kewalram/Chanrai Group has been coping with the harsh business environment in the country?
“It has been a very tough time for us in the manufacturing sector. So, planning becomes very difficult.” He continued, “we have had to downgrade our forecasts. We scaled everything down during depression, so, when things started to pick up, we were not caught unaware. It wasn’t a sudden decision.”

According to him, “running a business has to be done in a business like manner,” adding, “we saw it coming and we prepared for it.”The good thing for Eburajolo is that the country has crawled out of recession, “but for some time now, it has been very terrible for manufacturers, generally. This is because the country is heavily import-reliant. Everything we produce has a lot of foreign input. During this period, it was quite difficult coupled with the depreciation of the Naira. If you have to adjust your prices, there is a limit to which you can do. So, most companies have been contended with breaking even and hoping for better days in the future.”

He noted that most companies are unable to pay dividends and some out of tradition, are bending backwards just to satisfy their shareholders by paying some interim dividends: The reason being to put some money in the hands of the public so that they too could purchase goods and services. Nigerians are hardworking but trust the environment and good leadership, what leaders are sending today to the youths is that there is nothing like hardwork.

For the lawyer and manufacturer, if you produce and don’t sell, you have done nothing. But if you sell and you are unable to collect your money it is even more difficult. In order to make the workers comfortable, he said his company was giving out 10kg of rice for those in the lower cadre as a way to empower them. “That went a long way to boost productivity. So, it was better for us to make the sacrifice.”

One other significant thing was that the company did not reduce its staff strength. “Those who were due to retire, were asked to go and all their benefits paid and then some of them who were still considered strong, after retirement, were brought back on contract for service, which is renewable every year.” As the group’s deputy managing director of a firm that was into textile milling, he is aware of the changes that have taken place in the industry and how they have impacted the sector.

“Government caused everything. We couldn’t compete with the Asian market and we just opened ourselves for the result that we got,” he said.He blamed the decline of the textile industry on the hasty decision by Nigeria to ratify the World Trade Organisation (WTO) treaty in 1995.

Under these agreements, the textile industry was brought into full compliance with the General Agreement on Tariffs and Trade (GATT) rules, and all quota restrictions were rolled back by January 1, 2005. According to him, in accordance with WTO rules, Nigeria had to remove any protection of the local textile industry. “It would have been better for the country to secure special arrangements with the WTO, such that the local textile industry would be protected until it was surer on its feet,” he said.

Eburajolo added, “Nigeria was not prepared when we signed for it. The textile industry protested, but we couldn’t do anything about it. Government did not consult with stakeholders. If you can’t compete, you run at a lost.”During this period of misfortunes and eventual collapses of the industry, “we moved into other things,” the Kewalram/Chanrai boss said.

A report by the United Nations University (UNU) revealed that in 1987, there were 37 textile firms in the country, operating 716,000 spindles and 17,541 looms. This was the golden period of Nigeria’s textile industry. The UNU report noted that in 1991, two companies, which coincidentally, its report focused on, were either directly owned by Indian investors or were subsidiaries of Indian-owned companies: Aflon Nigeria PLC was owned by Afprint Nigeria Plc, which was in turn part of the Indian Kewalram/Chanrai group and Spintex Mills (Nigeria) Limited was also an Indian company.

“At the peak of textile milling in the country, the companies went into backwards integration and we had over one million people employed, whether directly or not. For Afprint, there were about 12,000 farmers in the Northeast producing cotton. Today, there are not more than four surviving textile mills,” he said.
Between 1985 and 1991, the industry recorded an annual growth of 67 per cent, and as at 1991, it employed about 25 per cent of workers in the manufacturing sector. The period was that of Multi Fibre Agreement (MFA).

The MFA was a system of quota that could be imposed by developed countries on the amount of textile products developing countries could export to them. This was interpreted largely as a protection of the United States’ textile industry from China. The MFA was replaced by the WTO’s Agreement on Textiles and Clothing (ATC) in 1995.

Until 2005, when the MFA ended, there was a quota on the amount of textile that China could export. During this period, Nigeria’s textile industry received a lot of foreign investment. Before the MFA expired, the United States introduced the African Growth and Opportunity Act (AGOA), an initiative that opened up the American market to African countries. However, by the time the quotas were lifted, Chinese exports increased rapidly and proved to be stronger competition than African companies could handle. African countries suffered from the increase in exports from the Chinese textile industry.

Looking back now, Eburojalo said what has contributed greatly to the decline is ‘policy somersault’, which is a stock in trade of Africa. In fact, in Ghana, the operators of the Akosombo Mill had to shut it down. “I remember a statement made by an expatriate director when the company was being closed down. “Who says the Ghana Company will not be doing better than Nigeria’s in the future? When the future is better we would come back. Today, the place is working again.”

The man does not see any revival hope for the industry, because “those textiles come in by way of smuggling. Look at Francophone African countries, they don’t produce or manufacture, they are just dumping ground. And you can’t compete favourably in such a situation.”He added, “look at grey baft, which we use; from in India, you get it at about 20k, while from Nigeria Textile Mill, its is 80k. The chemicals and everything we are using are imported from Asia, how can we then compete with them? During the government of Obasanjo, people went and took the money from Textile fund, but what I knew was that it couldn’t work. Ask me, has any one new one come up in recent times?”For him, the hope is that something better comes up one day. He however, said, “government does not have any reason doing business. It should be privatise and have a strong organisation that does not allow for monopoly.”