How influx of imported goods threatens local firms

• Monthly imports average hits N500b
• Local content policy still a paper tiger
• Manufacturers spend N1.5b on alternative power

WITH an average monthly import profile of N500 billion into the economy, spurring rising pressure on competitiveness of local industries as well as increased spending on alternative power supply, the Federal Government may need to improve its intervention in the industrial sector before the resilience of Nigerian manufacturers wanes.

According to manufacturers, while dealing with the difficult operating environment remains a lingering challenge for their businesses, the need for government to place a balance between revenue generation and industrial growth remains critical, considering the threat to competitiveness of local industries by imported goods.

Indeed, the nation’s manufacturers noted that though several initiatives have been proposed and some implemented within the last few years, the need to increase intervention in the ailing real sector remains key, especially in the face of emerging bilateral arrangements that may further expose the nation’s industrial sector to undue pressure from imported goods.

Already, some manufacturers enjoying financial intervention from development finance institutions (DFIs) in the country are seeking restructuring of their loan repayment agreement while such DFIs have begun advocacy to aid the patronage of goods from such manufacturers, their clients who are generating income and employment in the country through their enterprise.

For instance, the Bank of Industry (BoI) at different times had to advocate patronage for its customers in order to aid loan repayment of some manufacturers that accessed its facilities.

Specifically, imported fast moving consumer goods (FMCG), electronics for household use, building and raw materials for the construction and manufacturing industries have remained the drivers of the growing volume of imported containerised cargoes into Nigerian ports.

Latest import data accessed by The Guardian showed that imports in Nigeria increased to N533.97 billion in March this year from N524 billion in February.

Import data from the National Bureau of Statistics (NBS) showed that imports in Nigeria averaged N375 billion from 2002 until 2015, reaching an all time high of N155.5 billion in March 2011 and a record low of N59.6 billion in December 2002.

An aggregate of the nation’s imports shows that industrial supplies account for 27 per cent of total in 2014; capital goods (23 per cent); food and beverage (17 per cent); fuel and lubricants (14 per cent); transport equipment and parts (12 per cent); and consumer goods (7 per cent).

Similarly, while 43 per cent of total imports came from Asia; 34 per cent from Europe; 15 per cent from America, seven per cent came from other African countries.

Worried by the ability of manufacturers to sustain their businesses in the face of lingering challenges, President, Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs decried the huge amount spent on alternative power supply.

At an average of N73.12 million per month, manufacturers may have expended about N1.5 billion on alternative power generation, with costs rising within the last few weeks due to scarcity of petroleum products in the country.

He said: “We are all aware of the consequences of the current electricity performance in the country as it relates to industrial growth and development, most especially manufacturing productivity. Permit me to say that due to the erratic power supply in the country, manufactures have for long, resorted to generating own electricity despite the huge cost that is associated with such decision.

“I wish to inform you that a survey of the manufacturing sector by MAN in 2014 showed that manufacturers expended N73.12 million on alternative source of energy on monthly average that year. You will agree that this cost is quite enormous as well as burdensome and could lead, if not checked, to massive shake-up in existing factories. It could also hinder potential investment in the sector especially as majority of manufacturing companies are under the SME category.

“It is pertinent to point out that apart from the poor electricity supply and its debilitating effect on industrial productivity, issues of high fixed charges and tariff rates are also worrisome. MAN is always on the alert regarding developments in electricity tariff because of the central position energy costs occupy in manufacturing total cost of production in the country. May I inform you that the share of energy cost to total cost of manufacturing production hovers around 40 per cent over the years.”

Following the rising deficit, MAN has concluded plans to resuscitate its plan towards building Integrated Power Projects for industrial clusters.

MAN noted that the project which has been pending due to advice by the then Power Holding Company of Nigeria (PHCN) that electricity was going to improve was suspended, but added that plans are underway to sign some Memorandum of Understanding with foreign companies that would help build it, in order to aid electricity needs of industrial clusters.

On his part, former Speaker of the House Representatives and Chairman of Rumbu Industries, Alhaji Salisu Buhari decried growing imbalance in trade, noting that imported goods, due to price differentials were out-staging locally produced goods.

According to him, local industrial firms have had to contend with benchmarking their price against that of imported goods, adding that levies instigated by big players in the supply value -chain as well as difficult operating environment, were hampering the competitiveness of many local players.

For producers of primary and secondary aluminium products, cold rolled coils, enamel wares, galvanised iron and steel, nails and wires as well as steel pipes, the lack of government patronage of their products is further encouraging influx of substandard products into the country.

“The sector has emphasised the need for government to patronise made-in-Nigeria products as a way of curbing the obvious challenge of influx of sub-standard imported products and to encourage local manufacturers,” said Basic Metal, Iron and Steel and Fabricated Metal Products Group of the Manufacturers Association of Nigeria, in its recently released sectoral report.

“This request has not been actualised by government as it has been observed that the majority of the sub-sectors are yet to be patronised by the government,” said the group, adding that the non-patronage is against the spirit of the resolutions earlier reached with the government.

The group argued that government should show the way by patronising locally made goods before urging Nigerian consumers to do so.

Already, with stakes in different industrial firms, the Bank of Industry (BoI) has increased its advocacy on the need for government to protect local industries through policy formulation and implementation that would lead to increased patronage of locally manufactured goods, economic growth and job creation.

Managing Director of BoI, Rasheed Olaoluwa, observed that local manufacturers have the capacities to meet local demand and end reliance on foreign alternatives, with the enactment of protectionist policies.

According to Olaoluwa, a major strategic step we can take here is to protect local firms that can produce what Nigeria needs; we do not need to import what we can produce.

With a proposed establishment of a Continental Free Trade Area (CFTA) in Africa by 2017, there are anxieties on how Nigerian industrial firms will thrive if their competitiveness is not improved.

At the moment, three Regional Economic Communities (RECs)—the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and Southern African Development Community (SADC)—have reached an agreement to expedite the process towards the operationalisation of the tripartite Free Trade Area by finalising outstanding issues.

With this development, the three regions have made a bold move to realise the African Union (AU) 2017 target ahead of the Economic Community of West African States (ECOWAS) region, which is still bedevilled by other trade issues.

Indeed, the tripartite agreement would see the establishment of a single market for the 26 African countries in the Eastern and Southern African regions, while outstanding issues like the elimination of import duties, trade remedies and rules of origin, as well as the commencement of Phase II negotiations covering trade in services, cooperation in trade and development, competition policy, intellectual property rights and cross border investments would be addressed under the outstanding issues.

According to the Director-General of Standards Organisation of Nigeria (SON), Dr. Joseph Odumodu, continental trade deal can only become achievable if standards’ issue is addressed as well as other bilateral trade agreement concerns.

Odumodu added that African countries need quality infrastructure to kick-start the CFTA.

“It is not a national security meeting. This is a briefing by the Ministry of Defence on the operationalisation of the Multi National Joint Task Force (MNJTF) and the relocation of the command control centre to the North East, so it is something restricted to the Ministry of Defence.”

The permanent secretary explained that the meeting afforded the top security chiefs an opportunity to brief the President on the progress so far recorded in the fight against Boko Haram insurgency and arrangements being made to commence the relocation of the Command Control to north east in compliance with a presidential directive.

He assured that with the steps so far taken by the military, Nigerians would soon heave a sigh of relief.

“The Nigerian Armed Forces are very ready, we have briefed him. One very interesting thing about it is that we are going out much happier because he has shown to us that he is still a soldier. He has updated and enriched our strategic plans.

“The second item that was discussed is the movement of the command centre to the North-East. We have briefed him on how far we have reached on that and he has given us some additional assignment, but very soon the centre will be fully operational.

“I also want to assure Nigerians that with what we have come out with from this meeting, we are very enthusiastic that the issue of Boko Haram will soon be over. He has given us hope that we will see peace and security in the very near future.”

Asked what new initiatives the military was bringing in the fight against Boko Haram, the permanent secretary noted: “Now we have come as a united front. We have Chad, Cameroon, Benin and Niger. We are coming out with one strategy that we are going to address the Boko Haram insurgency with, unlike before when each country was doing it alone.”

When asked if the matter of the change of service chiefs was discussed, he said, it did not come up.