The Nation Newspaper

Category: Industry

  • Will Dangote’s N165b rice investment do the magic?

    Will Dangote’s N165b rice investment do the magic?

    Ahead of the 2015 deadline for attaining self-sufficiency in rice production, foremost industrialist Alhaji Aliko Dangote has invested $1 billion (about N165 billion) on rice production and processing in five states. The investment is expected to save Nigeria an estimated N360 billion spent yearly on rice importation, reports Chikodi Okereocha.

    It remains a paradox that despite the availability of arable land and manpower to support local rice production, Nigeria spends an estimated N360 billion yearly on importation. Nigeria is ranked the world’s second largest importer of rice behind China, consuming nearly six million tons of the commodity yearly.

    More than half of this (over three million tons) is imported mostly from India, Thailand, and Brazil. “Total import volumes oscillate from 1.7 million tons to 3.2 million tons, depending on the tariff structure, volume of local production and the prevailing local circumstances, weather and other vagaries in the rice value chain,” says former Minister for Industry, Charles Ugwuh. However, there are indications that the situation, which has since kept the Federal Government and stakeholders in the agric sector worried, might be reversed soon to pave the way for the nation to meet the 2015 deadline set for self-sufficiency in rice production.

    Already, Alhaji Aliko Dangote, Africa’s richest man and President, Dangote Industries Limited (DIL), is investing $1 billion (about N165 billion) in rice production and processing in Edo, Jigawa, Kebbi, Kwara, and Niger states. The Nation learnt that DIL, Africa’s quoted and most diversified indigenous conglomerate, has  acquired farmland in those states totalling 150,000 hectares for the project, which is expected to become the largest single investment ever made in rice production in Africa. The project, seen as a shot in the arm of the present administration’s on-going reforms of the Agricultural Transformation Agenda (ATA) launched in 2011, was sequel to the signing of a Memorandum of Understanding (MoU) between DIL and the Federal Ministry of Agriculture and Rural Development (FMARD).

    Under the MoU, the indigenous multinational will also establish two state-of-the-art large-scale rice mills with a capacity to mill 120,000 Metric Tons of rice paddy each. This brings the total capacity to 240,000 Metric Tons, with plans to double the capacity within two years. The rice plant is estimated to produce 960,000 metric tons of milled rice, representing 46 per cent of rice imported into Nigeria.

    For the FMARD, the ambitious investment could not have come at a more auspicious time considering the fact that the Ministry has been working with various stakeholders to catalyse increased investments in agriculture with a particular emphasis on private sector investments.

    For the Ministry, therefore, the investment represents a significant boost for the current effort of the Federal Government in achieving its total import replacement by 2015. The Minister of Agriculture, Dr. Akinwumi Adesina said that much at the signing of the MoU.

    Hear him: “This investment by DIL is transformational for Nigeria and the rest of Africa. The 150,000 hectares of rice farms and the planned 240,000 Metric Tons processing capacity of international quality grade rice is guaranteed to turn Nigeria away from being a rice importing country to a major rice exporter. Through this billion dollar commitment, Dangote, Africa’s leading business man, has clearly attested to the policies and approach that the Federal Government has undertaken to transform the nation’s agricultural sector.”

    The Minister noted that the rice self-sufficiency policy of the Federal Government was directed at saving Nigeria N356 billion annually and putting this into the hands of Nigerian rice farmers and rural communities. He said that within three years, Nigeria’s national paddy rice production rose by an extra seven million Metric Tons, while the number of integrated modern rice mills in the country rose from just one in 2011 to 18 by 2014, all processing the local paddy into high quality finished rice. He said high-quality and well-packaged Nigerian rice is now in the local market, including Quarra Rice, Umza rice, Ebony super rice, Eko rice, Mikap rice, Ashi rice, Queen of the Niger, and Mama’s Pride.

    Dangote could not agree less on the potential of the investment to transform the nation’s agric sector. He explained his company’s investment decision thus: “Our goal of making Nigeria a net exporter of rice will be achieved faster by this significant investment, and I congratulate the Minister of Agriculture and his team on the very strong demonstration of public-private sector partnerships and collaboration to drive significant transformation in Nigeria’s agriculture sector.”

    As an integrated operation, the Dangote farms and the mills are expected to significantly boost smallholder rice production in the regions through a nucleus and out-grower farming model, thereby transforming livelihoods in rural Nigeria. Besides, the selected sites are rice-growing communities and they will be supported by Dangote’s provision of agro-inputs, training, and marketing linkages in order to improve community farming operations. Employment opportunities will also be created for at least 8,000 Nigerians.

    Dangote commended the government for evolving a robust and consistent policy that has made Nigeria an irresistible place to invest. He urged other entrepreneurs to join the moving train, rather than sit back and complain of not having a level-playing field and later on wave the flag of monopoly for successful entrepreneurs.

    President Goodluck Jonathan commended Dangote for building a strong industrial base in Nigeria. “It takes a lot of hardwork, commitment and discipline to achieve the feat by  Dangote. Today is a great day for Nigeria and this investment is worth the risk. The country is capable of producing rice that can feed the whole of West African sub-region,” he said, assuring Dangote that his investment will be protected.

    But there are challenges, one of which is the nation’s numerous porous borders. The President however, cautioned that the days of smugglers are numbered and that Government is determined to install electronic surveillance equipment that will depend less on human manipulations and interventions. He also vowed to put an end to the high spate of smuggling in the next 12 months. But it is not clear how the President intends to achieve this in 12 months considering the complex nature of smuggling.

    According to experts, cross-border smuggling, particularly via the Cotonou Port, remains one of the greatest huddles before local rice producers and this may frustrate the current move by Dangote to complement government’s efforts in realising its rice self sufficiency policy. Smuggled rice often find their way into various communities and towns in Nigeria through the neighbouring countries. The penchant of most Nigerians to consume imported rice at the detriment of local ones has not helped matters either.

    This is partly responsible for why local rice production accounts for less than 50 per cent of the country’s total consumption, leaving the huge demand gap for polished/milled rice imported mostly from India, Thailand, and Brazil. Experts and stakeholders argue that until and unless Government stems the rising tide of cross-border smuggling, the latest intervention by Dangote may not enhance the nation’s chances to achieve the rice self-sufficiency target by 2015.

    Another issue that might pose a challenge for the foremost industrialist is the issue of tariff. Early last year, the Federal Government imposed a new tariff on imported rice to cut down imports and encourage local production of the commodity as well as offer incentives for investors in the sector. However, the policy became counter-productive, as the government was said to have lost over N300 billion revenue to smuggling through the borders with neighbouring countries.

    As Ugwuh pointed out, “It is absolutely critical that government manages the tariff regime to ensure product availability, fair/stable consumer prices, and protection of local producers/processors that are rendered cost uncompetitive by environmental factors and infrastructural handicaps. Elimination of tariff manipulations and other abuses including smuggling/corruption should provide stable ground for the enormous investments and hard work needed to grow local capacity to displace imports.”

    He listed other major challenges and difficulties facing the rice value chain to include capital mobilisation, limited irrigation facilities, lack of basic mechanisation, and seasonal availability of paddy, as well as the absence of a marketing board, and payments system for paddy. According to him, “to establish a 25,000-30,000 ton capacity rice mill based on Indian or Chinese equipment costs about $6 million. To keep the mill supplied with paddy requires $12 million per year. Funding difficulties, in terms of the quantum of funds, level of interest rate, issues of collateral securities and very short repayment options, kill off dreams/ambitions of indigenous private sector ownership of mills.”

    The former Minister, therefore, said the government intervention and assistance in the form of a long term loan is absolutely necessary. He said a great deal of excitement and momentum has been created by the government in favour of local rice production by deploying high tariffs and import-substitution strategies aiming to achieve total import replacement by 2015, noting that although cross-border smuggling via the Cotonou Port is a great threat, new investments by the government and the private sector into all aspect of the value chain give hope that success could be achieved in the medium term if current policies and direction are sustained.

    Hope by stakeholders that new investments into all aspect of the rice value chain particularly by private investors led by Dangote would achieve result is largely anchored on the pedigree of the man globally acknowledged as a serial investor. The consensus is that given the pan-African entrepreneur’s success story in all the sectors where he has ventured, his intervention in local rice production would drive the nation’s match towards attaining self-sufficiency in rice.

  • N4.9b exportable goods handled at Seme border, says Customs

    The Nigeria Customs Service (NCS) in Seme Border said it handled exportable goods valued at N4.9 billion between January and June this year. Area Comptroller, Willy Egbudin said this in a mid-year report of the Command made available to the media in Lagos.

    Egbudin said that goods exported were plastics, furniture, fruits and drinks in retail packs, mattress, beer and slippers, among others. He said the total amount due for the Nigeria Export Supervision Scheme was N24.5 million.

    The Comptroller said in spite of the challenges posed by the aquatic and marshy terrain of the Command, it had achieved higher level of suppression of smuggling and other related offences. He said this was possible through increased enforcement activities, enlightenment of border communities and the trading public about the dangers of smuggling.

    Egbudin said 18 suspected smugglers were arrested and their cases were at various stages of investigation and prosecution. The Comptroller said the command also made 487 seizures with a Duty Paid Value of N196.2 million.

    He said that during the period under review, ECOWAS Trade Liberalisation Scheme and complaint-goods with a Cost InsuranceFreight value of N5.39 billion were cleared through the command.

  • Women network advocates entrepreneurship skills for students

    President, Nigeria Employers Consultative Association (NECA’s) Network of Entrepreneurial Women (NNEW), Mrs Lola Okanlawon,  has urged Non-Governmental Organisations (NGOs) and parents to impart  basic entrepreneurial skills in young people to reduce unemployment.

    Making the call in an interview in Lagos, Okanlawon said that most viable businesses collapsed because their owners did not have the children that could be relied upon to run their businesses successfully after they might have passed on.

    She said that entrepreneurship skills should be encouraged at the secondary school level in order to equip young people to be job creators. “If the women should die without getting someone that will succeed them, it will be a problem; and we are saying it is better for us to catch them while they are young.

    “We want to have them looking for things where others are not looking at; where opportunities can come up. And we feel that we can do it with these young ones so that once we start to tell them, or to teach them to look outside the box, they should not say okay when I finish the university, I am going to start to look for a job, because you know right now, getting jobs is very difficult. We have so many graduates out there who don’t have a job.”

    She said that one of the visions of NNEW was to inculcate entrepreneurial skills in young people across secondary schools in order to teach them to be self-employed. While noting that while the National Bureau of Statistics (NBS) put urban unemployment in 2013 at 29.5 per cent, a financial advisory company, Financial Derivatives Company (FDC), in a recent report, also predicted an increase of two per cent in the rate of unemployment in 2014.

  • Young Ghanaian entrepreneurs to benefit from US largesse

    Scores of young Ghanaian entrepreneurs are to benefit from a number of initiatives to be introduced by the United States of America. Under these initiatives, grants will be offered to support start-ups, expansion of businesses and social ventures in six countries in 2015 including Ghana, the Democratic Republic of the Congo, South Africa, Zimbabwe, Tanzania, and Rwanda.

    This initiative was announced by President Barack Obama when he met young African leaders under the YALI initiative in Washington. Over the next two years Ghanaian entrepreneurs will benefit from a host of initiatives that will see the US Government expanding support to them by connecting them to investors, advisors, and distribution networks in the US and across the world.

    Over the next year, the US State Department will also lead three partnership opportunity delegations of entrepreneurs and investors to Ghana and two other African countries Tanzania and Ethiopia. In addition, the State Department and the U.S. Africa Development Foundation (USADF) will support selected young African leadership initiative (YALI) entrepreneurs to attend and participate in the DEMO Africa 2014 conference, to be held in Lagos, Nigeria, between September 25 and  26. DEMO Africa is a platform for top African companies to launch their products and announce to Africa and the world what they have developed.

    Speaking to the YALI participants, President  Obama said the United States will continue to provide young Africans access to resources they can use to put their skills to work in service of their communities.

    Meanwhile, hundreds of new entrepreneurship grants will be dished out to African entrepreneurs. The USADF will partner with the US State Department to offer $2.5 million in seed funding to members of the YALI Network over the next three years in the form of 250 small entrepreneurship grants.

    These grants will support start-ups and expansion of businesses and social ventures in six countries in 2015, including Ghana, the Democratic Republic of the Congo, South Africa, Zimbabwe, Tanzania, and Rwanda.

    In a related development, U.S. embassies across Africa said it would build entrepreneurial capacity beyond the capital cities by training and helping to incubate the businesses of at least 5,000 aspiring entrepreneurs from the Network in provincial cities and rural areas during 2015.

    StartUp Weekend and other experts will accompany a mobile incubator, equipped with the tools and technology to get a business off the ground.

    The programme  is billed to be in collaboration with local governments, institutions, and NGOs, the workshops and equipment are designed to walk aspiring entrepreneurs through the basic precepts of starting a business, including writing a business plan, leveraging online resources, raising capital, and expanding market share.

  • Wanted! Local substitute for imported raw materials

    Despite Nigeria’s rich resource endowment, the country is still caught in the web of an import dependent raw materials economy. This has left sour taste in the mouths of manufacturers and industrialists. However, if on-going efforts by the Raw Materials Research and Development Council (RMRDC) are anything to go by, the situation appears set for a reversal. Assistant Editors Chikodi Okereocha and Okwy Iroegbu-Chikezie report.

    Before his appointment as Director General (DG) of the Raw Materials Research and Development Council (RMRDC) on April 8, 2014, Dr. Ibrahim Hussaini Doko had his job clearly cut out for him. Doko, whose agency has the mandate to promote, develop and utilise Nigeria’s vast industrial raw materials to feed the industries, was expected to reposition the agency and reverse the  trend where between 80 and 90 per cent of raw materials used by local industries are said to be sourced abroad despite the abundance of raw materials locally.

    Experts say that the situation, described as the ‘import syndrome’ where manufacturers rely heavily on imports rather than source raw materials locally, has been digging a hole in the purse of the Federal Government to as much as N1 trillion annually. They, therefore, say that if Doko succeeds in halting the huge capital flight through import of raw materials, he would, by extension, be endearing himself to the hearts of manufacturers and Nigerians generally who have also been bearing the burden.

    For instance, not a few manufacturers have been agonising over the persistent high cost of production arising from the prevailing high cost of imported raw materials due to the high exchange rate. The skyrocketing cost of production is said to be responsible for the high cost of goods produced locally compared to imported ones. The cheaper price of imported goods is blamed for the penchant of Nigerians to patronise imported goods at the detriment of locally produced goods.

    This is why many local industries that could not stand the heat of the competition in the same market with imported goods are fast disappearing from the industrial landscape.

    By repositioning the agency to address the nation’s import dependent raw materials economy and enhance the global competitiveness of local manufacturers, the Chairman of DN Meyer Plc, Sir Remi Omotoso, noted that RMRDC would also help Nigeria stop creating employment for other people offshore particularly in Nigeria where the rate of graduate unemployment is very high.

    “There has to be that facility provided or promoted through or by the Ministry of Industry for production of local raw materials. “If we are producing the raw materials here you know that people will be employed in those outfits manufacturing those raw materials. They will also be paying income tax and a lot of benefits will accrue to government,” Sir Omotoso told The Nation, noting that a lot of materials used in the production of goods are available locally.

    National Vice President, National Association of Small Scale Industrialists (NASSI) and Managing Director, Spectra Industries Limited, Mr. Duro Kuteyi  frowned at some manufacturing companies who would rather import raw materials than buy locally. While lamenting the lack of raw materials for certain sectors of the manufacturing sector, he told The Nation  that the Food and Beverage sector where his company operates has no challenge with raw materials rather, with the cost of the raw materials and the issue of storage. He therefore, called on the government to improve on the quality of the seedings such as groundnut to protect it from diseases that affect oil seeds.

    “The  current quality of cocoa, maize and soya  is good, but the government needs to assist farmers to obtain cheaper seeds and land preparation in addition to adequate fertiliser,” he said.

    Like Kuteyi, Sir Omotoso lamented that those who should be developing local raw materials to feed the industries would rather go and import them and sale. “There is need for government to get RMRDC back in place in a purposeful, focused manner, visionary in its approach by collaborating with manufacturers to get a lot of the inputs produced locally,” he insisted, adding that putting RMRDC back on track is similar to the 10 per cent local content initiative in the oil & gas industry, which is necessary if Nigeria must realise her dream of becoming an industrialised nation. He said government could encourage the drive for local substitution for raw materials through some sort of incentives since government is mostly affected by the problem of import syndrome.

    Omotoso expressed optimism that after satisfying her local needs, Nigeria may even end up exporting to other countries. Hear him: “If we are compelled to rely on our own internal resources I can assure you that those who are importing will begin to see the need to develop local substitute for the imports. You must not expect the manufacturers themselves to be the developers of these raw materials, it’s not going to work, there must be other people along the value chain who can fill in that gap.” Indeed, Nigeria’s army of unemployed youths are expected to take up gainful employment from a network of industries that will be engaged in converting raw materials from their primary forms to intermediate and final products needed by the industries.

    The belief is that all the basic raw materials to feed the industries are available locally, but are not available in sufficient quantity and quality. According to manufacturers, most of the available local raw materials are in unusable form, requiring value addition before they can be used by industries. The value addition is done mostly by small and medium scale enterprises (SMEs) because they take the materials from the unusable form to the next intermediate stage. It is the intermediate raw material that industries require.

    However, because of the low capacity of the SMEs to add value to available local raw materials, coupled with lack of access to capital to set up processing facilities, process technology and techniques, and spare parts, among others, they have not been able to fill the gap. Other challenges impeding the effective utilisation of local raw materials include multiple taxation by various levels of government, poor infrastructure, unbridled importation, labour cost, fiscal policies, non-sustainability of policies, high cost of funds, technical infrastructure, and gaps in diffusion of technology.

    The belief is that local raw materials in their natural forms do not have any value and would not attract any market demand; there is need to process them to meet internationally accepted quality and standards for use by manufacturers. The Nation  learnt that the RMRDC is aware of these issues, which was why, following the expiration of the last Strategic Plan (2005 -2009), it recognised the need for a review of that plan with the aim of refocusing the Council with regards to local raw materials sourcing and import substitution. Incidentally, Doko was appointed by the Board to chair the Committee for the review and development of the current Strategic Plan ( 2014 – 2017).

    The agency’s Deputy Director, Public Affairs,  Mr. Chuks Ngaha, told The Nation that the current strategic plan is focused on three pillars namely, to develop policy framework for deletion/import substitution (20 – 100 per cent) of 20 strategic primary and secondary raw materials with stakeholders in 2017; commercialise a minimum of 10 research and innovative projects (including three developed indigenous or adapted process equipment) into viable economic venture by 2017; increased local sourcing and utilisation of 30 strategic primary/secondary raw materials by 2017.

    Ngaha disclosed that in a bid to fast-track the implementation of the plan, the agency has held various retreats to ensure a buy-in of all cadres of staff and also interacted with the members of the Organised Private Sector (OPS) who are the major stakeholders in the success of the plan. “There has been an in-house review in collaboration with the private sector of the success/status of the Deletion Programme, which is actually the heart-beat of the Council. Each sector has been assessed. The Council can confidently say the levels of raw materials utilisation and savings of foreign exchange by the ten sectors of Manufacturers Association of Nigeria (MAN) has improved. The Council has also identified the capacity building requirements as it is key to deliver the Strategic Plan. A lot of in-plant trainings are going on,” he said.

    He also said there have been consultations with other strategic partners such as Nigerian Export Promotions Council (NEPC), Standard Organisation of Nigeria (SON), and Abuja Enterprise Agency, among other relevant stakeholders who are coming on board. “All programmes of Council have been refocused to achieve the goals of strategic plan in ensuring raw materials value chain addition, job creation and economic growth,” he said, adding that “the progress recorded in local raw materials utilisation and backward integration in areas where Nigeria has comparative and competitive advantages (agriculture and solid minerals) makes it imperative for RMRDC to break new grounds in collaborations that would add value to her mandate.”

    Ngaha said progress so far recorded in local raw materials utilisation by the agency can be gleaned from the import bills of the different sectors of the economy, which vary from sector to sector. For instance, the Food Beverage and Tobacco sector that used to be one of the leaders of imported inputs for manufacturing, he pointed out, was the highest contributor to the Gross Domestic Product (GDP). “This means that the level of inputs of the sector requirement has drastically reduced categorically to about 50 per cent,” he argued.

    Similarly, in the Non Metallic Sector, cement being at the top of the agenda, Nigeria has fared very well, meeting local demands and even exporting to other African countries. He noted that this was not the case in the recent past when Nigeria was merely importing and re-bagging cement.

    He identified another programme of the Council that has greatly reduced spending on the importation of raw materials as the Raw Material Processing Clusters Programme, which aims at increasing productivity and competitiveness. As he explained, “the programme promotes Common Facility Centres (CFC), reduces cost of production, bridges the gap between the industry and the research institutions and fast-tracks commercialisation of Research & Development (R&D) results.

    This ensures increased production of primary and secondary raw materials required by our industries on a competitive scale. A lot of savings have been made as regards raw materials importation. With the Strategic Plan in place with very measurable targets by 2017,  number of  inputs for manufacturing would have been taken off the import list.

    The RMRDC spokesman however, admitted that there are still other sectors where a lot of work need to be done, one of which is Chemicals and Pharmaceuticals sector. “Nigeria still imports a lot of chemicals due to the fact that our petrochemical industries are still evolving.

    It is important to note that Nigeria is blessed with abundant feedstock,” he observed. He however, expressed hope that “with the Gas Master Plan, which was launched recently, and with investment in the Methanol plant, among others, in the recent future, the contributions to the GDP will be greatly improved.”

    But there are challenges. Ngaha said, for instance, that funding remains an issue for RMRDC since inception 26 years ago. The Private sector particularly, manufacturing industries, are also challenged.

    “Manufacturers in many developing countries often operate in very difficult business environment, which encompasses policy, legal, regulatory constraints and a general absence of institutional mechanism to support private sector development. Nigeria is no exception,” he said, adding that the manufacturing sector in Nigeria is currently in a crucial stage in its development because of challenges arising from increased level of trade liberalisation occasioned by multilateral and bilateral trade agreements to which the country has made commitments.

    That is not all. The direct outcomes of the challenges faced by manufacturing in recent times, according to Ngaha, also represent the challenges to RMRDC in terms of dumping of sub-standard raw materials and products. The attitude of Nigerians towards imported products, and uneven playing field between foreign investors and local entrepreneurs, among others, are also not helping matters.

    He, however, said that if the tempo of government’s policy in the area of infrastructure is maintained, and the lack of synergy and cooperation by major stakeholders in the nation’s industrialisation drive addressed, the challenge faced by manufacturers would ease off.

    “If the National Industrial Revolution Plan (NIPR) is to make the anticipated impact on manufacturing, deepening the utilisation of local raw materials must be accorded high priority,” Ngaha admonished.

    The need to promote efficient synergy among stakeholders for the purpose of ensuring sustainable sourcing of raw materials was the focus of a recent stakeholders’ meeting organised by RMRDC to announce the forth coming 2nd Nigerian Raw Materials Exposition (NIRAM Expo 2014) scheduled for October. “For us at RMRDC we are committed to address the lingering issue of capital flight experienced in the country through import of raw materials by Nigerian manufacturers as against the patronage of local materials due to insufficient awareness or quality of the product,” Doko declared.

    The DG, who was represented by Director, Agro Allied Department, Dr. Moyo Jolayoso frowned at the exportation of raw materials, which is imported back as finished products with the addition of certain additives at great cost. He identified the need for stakeholders to encourage the local supply of raw materials to halt the billions of naira spent on raw material importation when it can be sourced locally.

    “People still prefer to import raw materials because of quality concerns. The idea of the expo is our own contribution towards breaking the jinx arising from the gap between producers and those who need the raw materials. Another core area we will look at is the marketing aspect in order to identify ways that the private sector can break through in the international market,” another director in the agency, Mr. Samuel Olaniyan, explained.

    As far as the Director General, Nigeria Association of Chamber of Commerce, Industry, Mines & Agriculture (NACCIMA), Mr. John Esemede is concerned, there is no reason why the current import dependent raw materials economy should persist when Nigeria parades over 100 universities and 80 departments of agriculture, as well as 20 research institutes.

    His counterpart at MAN, Mr. Remi Ogunmefun, could not agree less, which was why he called on the agency to work hard to encourage local substitutes for the manufacturing sector to conserve the nation’s foreign  exchange reserves. He therefore, endorsed the Expo, expressing optimism that it would achieve its objectives if all stakeholders collaborate for efficient synergy.

    Beyond that, Sir Omotoso thinks that a carrot and stick approach in the drive for local substitution would do the magic. He explained it thus: “If you rely on local raw materials, manufacturers will be compelled to contribute to the research funds for that body (RMRDC) because we are all going to benefit at the end of the day. If however, you want to rely upon imported raw materials, tariff should be able to take care of that.”

     

  • On a bumpy road

    On a bumpy road

    Are the Free Trade Zones (FTZs) doing their job of stimulating industrial activities,  encouraging manufacturing of goods for export,  facilitating inflow of Foreign Direct Investments (FDIs) and creating jobs? To experts and operators, FTZs are handicapped by inadequate funding and government’s failure to fulfil its obligations to them, reports Assist. Editor Chikodi Okereocha.

    When the Federal Government opted to ride on the back of Free Trade Zones (FTZs) to stimulate industrial activities and encourage the manufacturing of goods for export, the expectation was that Nigeria would soon begin to reap bountifully from the initiative.

    The FTZs, otherwise known as Export Processing Zones (EPZs) or Special Economic Zones (SEZs),are specially designated industrial and commercial areas within a country where trade barriers, such as tariffs and quotas are eliminated to drive industrial presence in those areas and attract Foreign Direct Investments (FDIs). Economic activities within the FTZs are mainly geared towards export and such activities are expected to help promote transfer of technology and create jobs.

    By leveraging the FTZs to strategically improve the investment climate by stimulating export oriented business activities, the ultimate goal of setting up the FTZs was to diversify the nation’s economic base by weaning it of its over-dependence on proceeds from oil and gas. Although, between November 1991 when former military President Ibrahim Babangida led the foundation stone of the first FTZ in Calabar, the Cross River State capital, and now, a period of 13 years, the Nigeria Export Processing Zones Authority (NEPZA), the agency responsible for promoting and facilitating local and international investments into licensed free zones in Nigeria, says it has recorded some modest achievements, such achievements are considered mere drops in the ocean.

    For instance,  at the last count, the NEPZA, according to itsManaging Director (MD), Mr. Olugbenga Kuye, has licensed a total of 25 Free Zones across the country. Out of these, 12 are operational and open for business while the rest are at various stages of development.

    Kuye said the scheme has generated 3,000 new jobs from the various enterprises in the zones while the new FDI attracted has $664 million of which the Aluminium Smelter Company of Nigeria (ALSCON) EPZ topped the highest having invested $83 million for expansion of its aluminium smelter facility. This is followed by LADOL and Ogun Guangdong Free Trade Zones, respectively.

    The NEPZA helmsman also said  Nigeria’s Free Zones exported goods and services worth $664 million while local exports, which are local sales into the customs territory realised N29 billion.

    Kuye, who spoke at the Sixth National Council on Industry, Trade and Investment, also said the agency was putting mechinery in place to increase the volume of investment to about $15 billion in the next five years. He told council members that the agency had received 11 fresh applications for free zone status and that the applications are at various stages for consideration.

    He said the delay in granting free zone status was because of the inability of most zone promoters to meet relevant requirements, such as the provision of resettlement plan for current dwellers/inhabitants of the proposed free zone.

    However, experts, operators and stakeholders are far from being impressed by the performance of the FTZs.

    Some of them, who spoke with The Nation, described the performance of the FTZs as sub-optimal. For instance, Kola Oladipo, former chairman, Export Group of Manufacturers Association of Nigeria (MAN), said  the FTZs have failed to live up to the objectives of setting them up, blaming their sub-optimal performance on  lack of infrastructure and funding, among others.

    He accused the government of reneging on its obligations to provide the requisite infrastructure for the smooth operations of the FTZs. “Government failed to play its part; there is no government participation. Under the arrangement establishing the FTZs, government is supposed to provide access to land, water, electricity, and security, among others. But the government has failed to provide all of these, leaving operators in the free zones in the lurch,” he said. He said some operators, who could no longer cope with rising cost of providing their own electricity, water and security, have since fled the free zones.

    Oladipo is not done. He said the Nigeria Customs Service (NCS) is not helping matters either. According to him, operators within the FTZs are having a raw deal in the hands of Customs. “They (operators) are not supposed to pay duties for raw materials coming into the country to be used for manufacturing activities,” he said, adding that this has not been the case and it is against the original understanding that industrial activities are mainly for export.

    He said operators are sometimes made to sell manufactured goods to the local market rather than export. According to him, the original concept of FTZs was to develop export-oriented manufacturing in the non-oil sector of the economy.

    Kuye agrees with him. He explained that no import duty is payable for goods imported into the Free Zone either for consumption, production or capital goods and there is no export charges on goods exported. He noted that in the Free Zone, goods are transferred under customs escort from any ports of entry in Nigeria to Free Zones and there is fast-track of airfreight cargo movement under customs escort from any airport in Nigeria to the free zones. But Oladipo said customs has been observing these only in the breach, thus creating problems for the operators.

    He also said those managing NEPZA are mostly civil servants who lack understanding of the workings of the scheme and its operations. This, he said,was why the agency is not doing enough in the area of collaboration with relevant agencies such as MAN and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).

    “There is need for all the stakeholders to come together and collaborate if the concept of FTZ must work,” he argued, adding that the government must also come in through the Nigeria Export Import (NEXIM) Bank to fund the operations of the FTZs. He said government agencies, which run the FTZs  are on budget, thereby making funding difficult.

    Kuye admitted that budgetary provision in recent years had been on the decline. He however, noted that efforts were on ground to tackle this challenge by seeking alternative sources of funding, such as adopting the Public-Private Partnership (PPP) model as well as seeking assistance from international development partners.

    Noting that FTZs are, indeed, capital intensive, requiring adequate funding, a Lagos-based lawyer,  Obiora Akabogu, said apart from poor funding, “The FTZs are suffering from undue politicisation, which is why they are under-performing.”

    He said the original concept of a free zone is to stimulate economic growth in a designated area that requires industrial presence, but the fact that some states whose geographic locations do not support a free zone, are now dabbling into it means that they have lost focus.

    Akabogu said, for instance, that while the Lagos State Government’s decision to explore the FTZs’ initiative to boost its economic prosperity, which led to the establishment of the Lekki Free Trade Zone (LFTZ) could be understood given the availability of seaports for ease of export, the decision of the Ogun State Government to go into a FTZ project is difficult to understand. As far as he is concerned, “some of the states that have delved in the project despite not having seaports for ease of export are merely playing to the gallery or jumping into the band wagon.”

    He said such states should have channelled their lean resources to other deserving projects such as agric. “Cocoa used to be the mainstay of the economy of Western Nigeria, but has been abandoned. Some of the states in Western Nigeria who are dabbling into FTZs could have channeled their resources to agric such as cocoa farming,” he said. Noting that the Federal Government’s FTZ in Calabar has not been working at full capacity, the lawyer wondered how that of Ogun State, for instance, would work.

    Akabogu is right. The Federal Government’s failure to dredge the Calabar channel is threatening the survival of the CFTZ and Tinapa Free Trade Zone, two of Nigeria’s popular free zones. Terminal operators in the CFTZ, for instance, have been lamenting that the non-dredging of the Calabar channel has been stunting the growth of the CFTZ and Tinapa Free Trade, which are struggling to survive.

    Here, Oladipo’s accusation that the government failed to carry out its obligations rings a bell, as the concession agreement the terminal operators had when they took over operations stipulated that the dredging of the channel had to be done by the Nigerian Ports Authority (NPA) to the advertised draft of 9.4metres. Till date, this has not been done, prompting persistent calls by stakeholders on the Federal Government to ensure that the NPA completed the capital dredging of the Calabar river channel.

    That is not all. Other challenges identified by the NEPZA include policy reversals and inconsistencies, slow responses to changes in global trend, conflict and overlapping laws and procedures with other relevant government agencies, delay in passing into law the proposed Free Trade Zone Bill, which is before the National Assembly, high cost of borrowing funds and non-availability of long term fund as well as lack of consideration of free zones in policy formulation.

     

     

     

     

     

  • LCCI mentors young entrepreneurs

    The Lagos Chamber of  Commerce and Industry (LCCI) has registered 25 mentees for its 2014 mentoring programme. The mentees are young entrepreneurs drawn from various sectors of the economy.

    Speaking at the opening in Lagos, Vice President/Chairman, Board of Business Education, Services and Training (BEST) Unit of the Chamber, Mrs. Toki Mabogunje described the programme as part of interventions from the Lagos Chamber of Commerce “to truly position our young entrepreneurs for business success now and in the future”.

    She recalled that graduates of last year’s maiden edition had improved in their businesses, advising the new intakes to network with their predecessors for enhanced performance.

    LCCI President, Alhaji Remi Bello, who was represented by Council member, Mrs. Victoria Onafowokan-Obadina, said the programme was aimed at developing youths and making them responsible not only to themselves, but also to their families and the nation. While congratulating the mentees, he urged Nigerians to support the initiative so as to guarantee a great future for the country.

    The six-month programme,  organised in conjunction with the Kudirat Initiative for Democracy (KIND), according to the Director-General of the Chamber, Mr. Muda Yusuf, is a means of investing in future business leaders, thereby creating a  way out of the lingering unemployment challenges in the nation.

     

  • ‘How to decongest traffic on Lagos ports’ access roads’

    Council member of the Chartered Institute of Logistic and Transport, Mr. Alban Igwe, has urged the  authorities to provide policy frameworks on how decongest traffic on access roads to Lagos ports.

    He said in Lagos that part of the measures could include the provision of facilities in cities outside Lagos to handle port-related activities.

    “Lagos only provides access to the other parts of the country because it sits on the Atlantic Ocean. It’s a major port. We can actually move part of the operations in Lagos outside Lagos because we still have a lot of land in Nigeria. Lagos doesn’t have to be the only route for distribution.

    “So, if you move it out a little bit, and certain port activities take place in other places, Ogun State, for instance, even Ondo State you can create logistic supply chain centres that will handle different types of goods. And then we can also employ the rail, just like we have bonded warehouses that all the clearance does not have to be done within the port area.

    “We can create logistic supply trade centres where we can do some of the clearing that we do in the port.

    “We don’t need all the vehicles right inside the port. As a matter of fact, Lagos is just occupying 0.3 per cent of Nigeria’s land area,” he explained.

     

     

     

     

     

  • Govt directs ministries, others on data capturing

    The Federal Government has directed Ministries, Departments and Agencies (MDAs) to abide by the guidelines on the alignment of data capture, identification verification and authentication.

    The Secretary to the Government of the Federation (SGF), Senator Anyim Pius Anyim gave the directive at a workshop by the National Identity Management Commission (NIMC) for MDAs in Abuja.

    Anyim warned MDAs affected by the harmonisation to guide against sabotage.

    He said: “This workshop is not for you to analyse why the policy cannot work or why more time is needed. It is not for you to justify the need for your MDAs to have its own separate process or database.

    “Far from all these, the workshop is for you to quickly determine how your MDA can achieve the objective of streamlining activities of MDAs in identity management.

    “It is for you to optimise the use of scarce government resources and establish a single secure, reliable, accessible and scalable NIMS.’’

    Represented by the Special Assistant to the President in the Office of the SGF, Mr. Ferdinand Agu, Anyim said the integration of diverse data capture process and ubiquitous database in the MDAs was overdue.

    He advised the concerned MDAs to abide by the circular issued on the guidelines on the implementation of the presidential directive.

    “When President Goodluck Jonathan on October 17, 2013 gave the directive for all eligible Nigerians to be enrolled by December 31, he meant it. I enjoin you all to do all you can to ensure compliance.

    “In doing so we must also ensure the complete elimination of duplicated processes and further wastage of resources.

    “The government investment should be consolidated in the most optimal manner by that deadline,’’ he said.

    He said the deployment and management of a system of identity data capturing had been a major national challenge. Ayim said until recently, the multiplication of identity databases by different MDAs was a welcome idea since they served the purposes of managing particular demography unique to the agencies.

    He however said that over time, these databases had become overlapping and burdensome to the government.

    Anyim said in a changing world, systems evolve daily and Nigeria as a global player had no choice but to use identity management as a reliable tool for accelerating socio-economic development.

    Earlier, NIMC’s Director-General, Mr Chris Onyemenam, said printing of the national identity cards had been concluded and waiting for lunch by Jonathan. He said the cards would be issued to Nigerians as soon as the formal lunch was conducted.

    Onyemenam said the harmonisation of the NIMS would reduce the cost of governance, enhance the security of Nigerians as well as enhance government service delivery.

     

  • NEXIM Bank boosts regional trade through sealink project

    Operators in inter and intra-regional trade in West and Central Africa, whose businesses have long been hampered by poor transportation infrastructure, can now heave a sigh of relief.

    This is because the Sealinkproject, an initiative by Nigerian Export-Import Bank (NEXIM) to establish a direct coastal link between the two regions, may take off soon.

    The project, expected to promote regional investments in trade, enjoys theendorsement and support of various regional bodies across West and Central Africa, including Economic Community of West African States (ECOWAS) Commission, Federation of West African Chambers of Commerce (FEWACCI), and the Maritime Organisation of Central Africa (MOWCA).

    To realise the project, NEXIM Bank, in partnership with the management of Sealink Promotion Limited and other government agencies in the West and Central Africa Sub-region, announced  a private placement offer to individuals and corporate organisations within the sub-continent. The announcement was made in Lagos at an investors’ forum organised by Sealink to herald its plans to tackle the problem of transportation that has hindered the growth of business within the sub-continent.

    Under the new offer, a total number of 89,036956 ordinary shares will be opened for subscription at a price of $0.70 per share with each private individual entitled to buy a minimum of $14,000 worth of shares. The offer, which strarted since March 24 is expected to close on September 30.

    The Managing Director and Chief Executive of NEXIM Bank, Roberts Orya, explained that the offer was a private placement and not a public offer targeted at institutional investors and high network individuals.

    He said the Sealink project, a public-private initiative, will enjoy some concessions from the governments within the two regions in terms of priority berthing or some other forms of engagements.

    “We are watching it very closely to ensure that we don’t have people that will come from the backdoor and hijack the initiative, so at the end of the day when it comes to the issue of allotment, it is the Board of Sealink that will do the allotment so we will be able to identify who and who have subscribed,” Orya said.

    He also said soon, the shares would be segregated into different classes with class ‘A’ principally reserved for the organised private sector. “It is the private sector that are trading and so they will get priority, then we have some government agencies like Nigerian Maritime Administration and Safety Agency (NIMASA) or the likes that want to invest in it, we can give them the class ‘B’ shares while the class ‘C’ will be reserved for some foreign investors that want to have a little stake so that at the end of the day we are not just localised,” he explained.

    At the Investor’s Forum,  Chairman of Sealink Promotional Company Limited, Mr Wilson Attah Krofah said the idea behind the project is aimed at ensuring that the barriers that are most common in both land and air transportation are settled through ease of convenience, which sea transportation offers. He added that aside the need for a quick transportation, the essence of the project was to create jobs for people within the sub-region.

    He explained: “The initial share capital we are looking for is 60 million US dollars. This money is intended to buy shipping lines to carry goods, passengers and cargoes along West and central Africa. But part of it will be used as working capital, which runs to a total of $24million. Our target is to get money from private individuals who will be owners of the shipping line because we want the shipping business to be owned and run by private individuals from West and Central Africa so that we can have the control on how the shipping line is run.”

    Krofah noted that the aim was to encourage trade within West and Central Africa to ensure the creation of jobs and wealth for the sub-continent. “As you know, a lot of investors are coming to Africa because they believe there are opportunities here,” he said. adding: “As indigene of the sub-region, we should take full advantage of the opportunities particularly within the sub-region.

    “Otherwise, the continent will be exploited by foreigners and people in other sub-regions. Based on this, Sealink Shipping line has come to encourage us to trade among ourselves.”

    He noted that operators in the sub-region have so far been trading by road, which creates a lot of problems because of numerous barriers cross countries. “Even by air, there are safety issues, but when you go by sea, there are no barriers,” he added.

    However, the Director-General, Nigeria Chamber of Commerce, Industry, Mines and Agriculture, NACCIMA Dr. John Isemede stressed that the benefits of bilateral trade agreements will remain on paper if there were no vehicles and support from the governments in the effective movement of goods and people across regional borders.

    Dr. Isemede praised NEXIM and FEWACCI for the initiative, noting that for countries to trade effectively there must be a multi-purpose vehicle that will promote the cost advantage factor. “Today is a new chapter in the history of Nigeria where we are talking of transformation agenda, which encompasses the transformation of individuals and infrastructure in order to compete favourably with other parts of the world,” he said.

    Chairman, House of Representative Committee on Banking and Currency Hon. Jones Onyereri while commenting on the economic importance of the project and the role of legislation in facilitating trade integration, said it is a project that the government will be fully committed to support. He noted that it is an avenue to generate employment for the teeming unemployed youth in the country. He said: “For this project, as legislators, we are going to look at how our people will be empowered economically despite the challenges that we have.”

    Onyereri noted that since the project is a public-private partnership, it will be well run. “The government is a bad manager. As far as the legislative protection is concerned, we will ensure that we constantly review the Act that established NEXIM basically to give it the legal framework that will ensure that they go ahead of their core mandate,” he promised.

    The sealink initiative is another landmark of NEXIM Bank. It is expected to offer a unique and compelling investment proposition in the fast growing West and Central African region.