More industries close shop as recession bites harder
Downturn to trigger mergers in telecoms sector
The manufacturing and telecommunications sectors are becoming more adversely affected by the recession in the economy.
Already, experts have warned that the economic downturn will trigger mergers and acquisitions in the Information and Communications Technology (ICT) sector, if the economy remains weak.
According to available figures, more companies shut down last week, bringing the total number of businesses that have closed down operations in the last one year to 56.
As a boost to their operations, manufacturers are requesting that natural gas be charged in naira and not in dollar in line with the original intention and plan of government. And to prevent a possible collapse of the manufacturing sector in particular, and the economy in general, they urged the Senate and the House of Representatives committees on gas to intervene, as was done in the past administration.
President of the Manufacturers Association of Nigeria (MAN), Frank Udemba Jacobs, painted a gloomy picture of the sector in an interview with The Guardian at the weekend.
He urged a proper deregulation of the downstream petroleum sector to encourage private investment in domestic refining and petrochemical industry. The manufacturers want government to consider privatising the four national refineries to make them fully functional and save money for other purposes.
“At present 56 companies have closed down and this occurred during the last one year, from July 2015 to present. It is estimated that over 100,000 workers have been laid off. We are still working on the actual number of closures and lay-offs, however, I cannot say much about relocations because some companies may have only established a second plant outside the country, for whatever reason that is known to them,” Jacobs said.
On pricing of gas, the MAN president said: “By the dollarisation of natural gas, we mean that the price of gas is benchmarked to the movement of foreign exchange. This means that gas users have to pay at the current exchange rate. This was a later development because when the Gas Supply and Purchase Agreement (GSPA) was signed, payment was based on naira and benchmarked to the price of Low Pour Fuel Oil (LPFO), discounted to 30% of the price of LPFO.
“Thus, between 2000 and 2005, when most of our members converted their plants and machinery from the use of LPFO to natural gas, the price of gas was N10.39 per standard cubic metre (scm). This was benchmarked on the price of LPFO as published by the Petroleum Products Marketing Company (PPMC) and it was 30% cheaper than the price of LPFO being the cheapest petroleum products.”
The mergers and acquisitions in the ICT sector appear to be imminent as the industry’s investment profile has also been impacted negatively, especially by the foreign exchange situation.
This is even as The Guardian learnt that the Average Revenue Per User (ARPU) in the sector has dropped significantly from N3,000 in 2001 to N500.
ARPU is a measure used primarily by consumer communications and networking companies, which is defined as the total revenue divided by the number of subscribers. It is the average revenue received from paying users.
Besides, about 60 million telephone lines on the networks in Nigeria have become inactive. Telephone lines become inactive when subscribers no longer service (recharge) them.