The Nation Newspaper

Category: Industry

  • ‘Operating environment unhealthy for manufacturers’

    The operating environment remains challenging and it has affected the productivity and competitiveness of manufacturers who have to contend with rising production costs due to structural and institutional problems.

    The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, who stated this in Lagos, said though the challenges persisted, they did not deter foreign direct investment into the country, as investors daily explore the country for investment purposes.

    Yusuf told The Nation that the economy has continued to post relatively good growth figures and has offered a large market for consumer goods.

    He however, regretted that leveraging on these opportunities is still a herculean task for investors, especially the indigenous entrepreneurs. He listed some of the challenges facing indigenous entrepreneurs in the country to include lack of electricity supply, insecurity and lack of access to credit.

    While noting that the power situation is still a major problem for businesses across all sectors, he said energy cost remains a major threat to business sustainability. He said expenditure on diesel and other fuels has continued to increase despite the power sector privatisation, lamenting that  profit margin of most firms is yet to improve due partly to rising cost of alternative power supply.

    He said the chamber’s 2014 Business Environment Survey revealed that key sectors in the economy like construction, agriculture, manufacturing, oil & gas, have experienced poor growth. He therefore, called on the National Electricity Commission (NERC) to urgently address the growing concerns of consumers over outrageous electricity bills.

    According to Yusuf, most Small and Medium Enterprises (SMEs) spend considerable sums on payment for power never supplied. He called for the review of fixed charges, insisting that it is an unfair demand on power consumers.

    Hear him: “Manufacturers, especially SMEs, still have major challenges such as worsening power supply, lack of access to credit, influx of fake and substandard products, and regulatory infractions, among others. He said with cost of fund generally hovering between 20 and 30 per cent, not many businesses can generate turnover to match the cost.”

    The LCCI DG also decried the security situation in the country, noting that it has assumed a global and disturbing dimension with implications on investment evidenced by declining investors’ confidence across the broad spectrum of domestic, foreign and prospective investors in the economy. This, he said, is aside from the negative impact on the image of the country globally. According to him, a number of businesses have been relocating from the troubled spots in the country, coupled with several abandoned projects and escalating humanitarian crisis.

  • ‘How efficient port system can boost business’

    Is the implementation of the new cargo clearance and documentation procedure known as Pre-Arrival Assessment Report (PAAR) meeting the expectations of members of the organised private sector (OPS)? At a dialogue, experts and stakeholders from the public and the private sectors highlighted the challenges facing operators through the system. Assist. Editors Chikodi Okereocha and Okwy Iroegbu-Chikezie  report.

    For members of the organised private sector (OPS), particularly those who interface with the portss, the fear of gridlock at the nation’s ports is the beginning of wisdom.

    Because of the chaos at the ports caused by persistent  congestion, most members of the OPS, cut across the Nigeria Association of Chamber of Commerce, Industry, Mines & Agriculture (NACCIMA), and Manufacturers Association of Nigeria (MAN), have been counting their losses.

    Some members of NACCIMA, whose shops and businesses are located in and around Apapa, Lagos, The Nation learnt, have been forced to close shop due to congestion and lack of access to their offices. For them therefore, the one-day national dialogue on ‘Unlocking Shipping Gridlocks at the Ports: Stakeholders’ Initiative’ held in Lagos, could not have come at a more auspicious time.

    For one, the dialogue organised by NACCIMA in continuation of its advocacy role, brought together relevant stakeholders from the public and private sectors to brainstorm and proffer solutions to the challenges faced by importers and exporters at the ports, particularly in the wake of the recent introduction of Pre-Arrival Assessment Report (PAAR) by the Nigeria Customs Service (NCS). It was a response to complaints by the OPS, most of who say the new clearing procedure has been a pain in the neck due to alleged shoddy implementation.

    The PAAR, a new customs’ clearing procedure, was introduced in December last year, replacing the Risk Assessment Report (RAR) previously issued by former service providers. The new regime essentially sought to change the customs clearing procedure from analogue to electronic for speed, efficiency and cost-effectiveness. However, seven months down the line, the new procedure may have failed to meet the expectations of members of the OPS, especially those in the import/export business.

    For instance, the Chairman of the Export Group of NACCIMA Mr. Oluyenuwo Olabisi has long been lamenting that congestion and long queues of vehicles at the ports arising from poor implementation of the PAAR regime is taking a huge toll on their businesses.

    He said containers laden with export products are sometimes turned back due to long queues, leading to huge losses  as  products  loose their freshness  and cannot meet internationally accepted standards  for exports.

    Olabisi is not alone in his frustration over the situation at the ports. The Chief Executive of Harlink Investment Limited, Alhaji Liadi Nofiu, who is into the exportation of produce is also screaming blue murder. Lamenting the unbridled corruption at the ports despite the PAAR, he noted that exporters can only get their containers into the ports in preparation for exportation after one form of extortion or the other.

    He called on the Nigerian Ports Authority (NPA) to check corruption at the ports, which he said is affecting export business.

    The new customs clearance procedure also left sour taste in the mouths of clearing agents. Earlier, clearing agents under the auspices of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA) petitioned President Goodluck Jonathan over what they called ‘challenges associated with the issuance of PAAR by the NCS.’

    In the petition signed by its National President, Mr. Lucky Amiwero, the customs agents said PAAR is supposed to be issued before the arrival  of goods, but that in most cases, it was issued weeks and months after the arrival of goods at the port. This, he said, negates the objective of the establishment of the PAAR regime and drastically slow down the activities of clearance that necessitates the build ups and tension at the ports.

    Amiwero noted that the process of the issuance of PAAR has become associated with delays that resulted to the payment of huge demurrage to shipping companies and rent to terminal operators by importers and agents. He said it takes between 20 and 48 days before Customs is able to generate PAAR on a consignment. “The economic impact is high cost of clearance and delays, which will eventually lead to possible  closure of most factories due to inability to access the available stocks from the Ports,” he said.

    He further pointed out that most goods in the port have no PAAR to clear them, which is why they accumulate huge demurrage and rent.

    According to him, this is what forces importers to look for alternative through diversion of cargoes to neighbouring West African ports to reduce delay and cost, which is detrimental to the economy.

    “In a bid to reduce the time by Nigeria Customs in the issuance of PAAR, most PAAR issued could not be transmitted into Customs server, which stalls procedure for normal clearance process thereby constituting delays that attract demurrage and rent,” he said.

    That is not all. Amiwero also said most PAAR issued are with lots of discrepancies without resolution mechanisms put in place to address them, especially with the centralisation of PAAR process in Abuja.

    “The PAAR issued against the pre-release goods are now generating tension as most PAAR have a lot of discrepancy,” he stated in the letter, copied to the Minister of Finance/Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala; Secretary to the Government of the Federation, Senator Anyim Pius Anyim and former Acting Governor, Central Bank of Nigeria (CBN), Mrs. Sarah Alade.

    However, going by the quality of submissions and recommendations by experts and stakeholders who were resource persons at the  event, participants are expectant that most of the lapses in the implementation of PAAR would be resolved.

    And when this happens, the thinking is that this would help achieve the objective of the National Export Strategy (NES), which essentially provides the blueprint for competitiveness and development of the country’s export sector. Anchored in strong public-private dialogue, the blueprint strengthens the links between export development and socio-economic growth, which was why the NACCIMA dialogue was seen as a welcome intervention.

    It could not have been otherwise considering the observation made by the Coordinator of Save Nigeria Freight Forwarders (SNFF), Chief (Dr.) Osita Chukwu who lamented that when PAAR was introduced, it was as if the challenges have been overtaken. Unfortunately, the system, he said, failed. He identified some of the challenges as issuance and renewal of licences to agents, revocation of licences of agents when there are issues without proper investigation, etc. He therefore, advised that the process of renewal of licence needs to be properly and fairly handled.

    The shoddy implementation of PAAR has also not gone down well with the National Association of Government Approved Freight Forwarders (NAGAFF). Its Deputy National President, Mr. Ugochukwu Nnadi observed that part of the impediment to the smooth operation of the new regime is that “there is too much incentive for shipping companies, which encourages them to delay release of goods so that demurrage can be charged.” This, he said, explains why  the 21 days life line for shippers is not strictly adhered to.

    He identified other hurdles in the smooth running of the ports to include the enactment of new laws without abrogation of the old ones, which usually causes confusion that leads to delay in consignment, corruption at the exit gate due to sharp practices by port users, incessant breakdown of Customs server, which disrupts operations, ineffective use of E-transaction. The Freight Forwarders insisted that this must be reinforced. Mr. M. O. Oyebola, who represented the Executive Secretary, Nigerian Shippers Council (NSC), noted that the gridlocks in the ports are caused by ships’ congestion at the port approaches and harbour, congestion of cargo at the terminals, congestion of vehicular traffic at the port gates and port approaches, including human traffic congestion at port gates and processing points. He said activities of all the major actors in the shipping business contribute to the gridlock in one way or the other, whether NCS, shipping agents/companies, ports and terminal operators, regulatory agencies, freight forwarders,  banks, shippers, etc.

    Oyebola, however, pointed out that the greatest contributing factor to the shipping gridlock is the human factor, which cuts across all the actors in the shipping business. Said he: “Some bad eggs in the organisations critical to cargo clearance fail to respect the rules of engagement in the business of shipping. Such individuals are averse to the deployment and use of Information and Communications Technology (ICT), which reduces human contact to the minimum. He concluded that the gridlock in the port industry must be unlocked in order not to strangulate the nation’s economy.” For Amiwero, the nation’s inadequate infrastructure particularly at the ports must be addressed. The National President of NCMDLCA said NPA has a lot of role to play to reduce the gridlock by utilising some part of the money collected to develop the ports and upgrade the infrastructures. “All charges at the ports must be attached to services and this has been the bane of the infrastructural decay at the ports.

    The essence of port reform is to improve efficiency and eliminate congestion,” he argued, listing some of the major challenges at the ports to include delay in scanning of goods, no holding bay, rickety trucks, and PAAR operation, which has the effect of Nigerian cargoes being diverted to other ports.

    The National President, Association of Maritime Truck Owners (AMATO), Chief Remi Ogungbemi, aligns with Amiwero on the need to address infrastructure deficiency at the ports. As he observed, the volume of transaction at the ports has increased, and there must be infrastructural development to compliment it.

    “As long as the roads are bad, there will continue to be rickety trucks. No owner will want to buy a new truck that will get spoilt on bad roads. Truck terminals have been identified but there is need for a political will on the part of the government for it to see the light of the day,” he said, noting that space is a major factor and as at today there is no befitting bay or park. “Parking of truck on the road is not good but the truck owners have no choice,” he added.

    Olabisi could not agree less. He said, for instance, that since the creation of the Lagos Port about 37 years ago, there has not been an additional port. He observed that a structure had been put upon the old rail line that connects it to the port and all that need to be done is to remove the structure and link the rail line to Iddo Terminal, which is less than 100 kilometres. “This will enable some of the goods to pass through the rail line and reduce the traffic on the roads,” he said, adding that another practical solution to the congestion is for the tank farms to go and for the Snake Island to be developed into a major port.

    The President, Shippers Association, Lagos State, Jonathan Nicole said there is need for Standards Organisation of Nigeria (SON) to be used to access cargoes from their 36 regional offices across the world while an electronic system of manifest be introduced for use at the ports by Customs and shipping agents.

  • ‘Fed Govt committed to ensuring quality products’

    ‘Fed Govt committed to ensuring quality products’

    The Federal Government is committed to ensuring quality products for consumers, the Minister of Industry, Trade and Investment, Dr. Olusegun Aganga, has said.

    The minister spoke at the inauguration of “Check the Best Before”, organised by the Consumer Protection Council (CPC) in Abuja.

    He said ‘Best Before (BB) date’ also known as a durable life date, is a valuable source of information for consumers.

    According to Aganga, the Federal Government is committed to ensuring quality products for consumer’s satisfaction and safety. As a result, the labelling of minimum durability has been made an important component of the standard requirements for relevant products in the country. One of the major pillars of the Nigerian Industrial Revolution Plan (NIRP) is to instil the patronage of the made in Nigeria culture in Nigerians.’

    Aganga was represented by a director in the ministry, Mr. Jonathan Juma. He said since the inauguration of NIRP, the ministry has demonstrated unwavering commitment towards the growth and development of local industries.

    He said the programme was yielding results “as Nigeria is a net exporter of cement, producing about 28.5 metric tonnes annually. This made it possible for non-issuance of import licence in the sector in 2013.”

    “While the patronage of made in Nigeria products continues to enhance capacity utilisation and the country’s Gross Domestic Product, the ministry will not relent in working closely with industries. This is with a view to improve productivity and quality. We will also ensure that we significantly reduce the importation of substandard products into the country,’’ he said.

    The Minister explained that concerted efforts must be made by industries to embrace measures put in place to ensure product quality as well as protect Nigerian consumers. “For the consumer, it is an indication of the anticipated time that an unused product, when stored under appropriate conditions will retain its durability, potency or efficacy. It also helps the manufacturers, distributors and retailers to maintain product quality and safety,’’ he said.

    Aganga commended the efforts of CPC for embarking on the campaign as it would get industries to adhere to best practises and provide additional protection for vulnerable consumers in Nigeria. “It is observed that some industries engage in the sale of expired products with improper date markings. Others have been implicated in the alteration of Best Before dates just to maximise profit. The ministry will give every support to CPC in its ongoing efforts to step up its inspection and enforcement activities. This is with a view to detecting, exposing and prosecuting dubious businesses that profiteer at the expense of consumers,’’ he said.

    According to the Minister, an informed consumer is an empowered consumer to make a choice, assert him to get a fair deal and seek redress when not satisfied. He said that the ministry was in full support of CPC in its campaign as it was in line with President Goodluck Jonathan transformation agenda.

  • NACCIMA: rebased GDP figure understated

    NACCIMA: rebased GDP figure understated

    THE nation’s rebased Gross Domestic Product (GPD) figure released by the National Bureau of Statistics (NBS) is  understated. This is because about 60 per cent of transactions in the informal sector of the economy were not captured, the National President, the Nigerian Association Of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Alhaji Mohammed Badaru Abubakar, has said.

    At a forum organised by NACCIMA in Ogun State, Abubakar said given the enormity of economic activities in the country, Nigeria ought to have  become the 15th largest economy in the world if transactions in the informal sector were well captured and reflected.

    He regretted that, despite the reforms to improve economic conditions and business competiveness in the country, Nigeria still trailed smaller African countries, such as Ghana, Cameroun and Kenya, in global competiveness.

    Abubakar said: “The Global Competitiveness Report (GCR) Index 2012-2013 released by the World Economic Forum (WEF), indicated thatNigeria ranked 115th out of 144 countries assessed – behind Ghana, Kenya and Cameroun, which ranked higher at 103rd, 106th and 112th positions, respectively.

    “Only Benin Republic trailed Nigeria with a ranking of 119th, while South Africa ranked 52nd globally, making it the most competitive in Africa.  One of the hurdles Nigeria needs to scale to achieve better ranking is the poor perception of the country by Nigerians.”

    Abubakar, who spoke on the topic, “Improving Nigeria’s competitiveness in the global market: Panacea for growth and development of the non-oil export,” noted that achieving growth in the non- oil sector will  result in the establishment of border markets at some strategic locations, adequate funding of non-oil commodities, development of infrastructure, and provision of  logistics to support supply value added chain.

    He listed other fallouts from the growth in the non oil sector to include increase in dominance of primary commodities and high productive capacity, empowerment of  Small and Medium Scale Enterprises (SMEs) through  entrepreneurship, development of agro-allied industries, and packaging and labelling standards of made-in Nigeria products. It will also enhance Nigeria’s comparative and competitive advantages.

    Abubakar noted that for Nigeria to remain competitive in the global market, it must keep investing in capacity building. “What is needed is new job creation with high-tech, high-value, innovative, non-commodity items, which can be made a reality through the joint efforts of governments and private sector operators in a manner that would stimulate non-oil sector activities, enhance prosperity of businesses/citizens and improve balance of payments position of the economy,” he pointed out.

    While commending the Federal Government on the successful handing over of the unbundled companies of the Power Holding Company of Nigeria (PHCN) to private sector investors, he appealed to the government to accelerate the privatisation of the four government-owned refineries with a view to moving nearer the completion of all social infrastructures that the private sector is best placed to operate as witnessed in other countries.

    He also advised that appropriate policy framework be fashioned out to provide new operators of privatised entities a business-friendly environment to operate.

    Also speaking on the challenges of the nation’s non-oil export competitiveness, the Executive Director/Chief Executive Officer (CEO), Nigerian Export Promotion Council (NEPC), Olusegun Awolowo, listed infrastructural deficiency, weak logistics to supply chain, poor standardisation of products, poor labelling/packaging, inability to meet export orders, as well as high cost of production as some of the challenges affecting the nation’s competitiveness in this regard.

    Others are restricted access to credit, unwholesome trade practices such as document falsification, trade mark encroachments and counterfeiting.

    Awolowo, however, said the NEPC has had to intervene to boost the competitiveness of Nigeria’s non-oil sector through several programmes. He disclosed, for instance, that the agency regularly assists companies’ participation in trade shows/fairs, business match-making, product identification, as well as organised development  programs  and capacity building for exporters. Besides, NEPC, he said, have collaborated  with relevant local and international agencies on product quality upgrade on sesame, butter processing, cashew processing and dry fish projects.

    The NEPC boss said the agency is going ahead to activate the Export Development Fund with a view to addressing the pre-shipment incentives to SMEs, facilitate increased access to export financing  and designate export terminal at the sea ports to ease congestion. He also disclosed that the agency would review  the Export Expansion Scheme (EEG), identify international benchmarks and improve on product standardization.

  • Mixed reactions trail release of N200b capital votes

    Mixed reactions trail release of N200b capital votes

    The Federal Government’s re lease of N200 billion capital votes has attracted mixed reactions.

    Port Consultative Council (PCC) Chairman Chief Kunle Folarin said the delay in the release of capital votes would adversely affect capital projects.

    “We all know the challenges of building funds in Nigeria today, our release from oil and gas, Customs and other areas of fund generation have been affected,” he said.

    The immediate past President, Association of Stock Broking Houses of Nigeria (ASHON), Alhaji Rasheed Yusuf, agrees with Folarin, noting that the release of the capital votes, coming towards the end of the first half of the year, was unhealthy for the economy. He said that the delay in the release of the funds would adversely affect the execution of projects earmarked for completion in the second quarter.

    He also said the delayed release could cause inflationary pressures if used for the payment of salaries of workers in Ministries, Departments and Agencies (MDAs).

    Similarly, the Chairman, Nigerian Institute of Building (NIOB), Lagos Chapter, Mr. Asimiyu Bashir, lauded the Federal Government for the release of the fund. He said it would increase liquidity in the economy and engender confidence in the nation’s polity. Same for the former Director of the Central Bank of Nigeria (CBN), Mr. Chris Nemedia, who said the release of the capital votes in June was still in good time. He urged the Federal Government to allocate the funds solely for the implementation of government projects earmarked for the year.

    However, for the Executive Secretary, Nigerian Association of Small Scale Enterprises (NASME), Mr. Eke Ubiji, the time the fund was released was not as important as how it would be utilised. He urged the Federal Government to pay attention to the implementation of the projects outlined for the second quarter.

    He also urged the government

    to build durable infrastructure, including electricity, which had notbeen in favour of business ventures in the country.

  • ‘Revive Raw Materials Research Council’

    If the current trend where over 70 per cent of raw materials for paints and other products’ manufacturing is sourced from abroad must be revised, there is the need for the Federal Government to revive the Raw Materials Research and Development Council (RMRDC), Chairman of DN Meyer Plc, Sir Remi Omotosho, has said.

    He said despite the fact that some of the raw materials for paints and other products manufacturing are available locally, the drive for local substitution embarked upon in the country in the 1980s was abandoned, and replaced in the 1990s by import syndrome with people relying heavily on imports.

    He said RMRDCwas set up to explore alternative sources of raw materials for the local industries, but regreted that all of a sudden, RMRDC disappeared from the radar. That agency ought to be revived,”he argued.

    He told The Nation to employ a carrot and stick approach in the drive for local substitution. “If you rely on local raw materials, manufacturers will be compelled to contribute to the research funds for that body because we are 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.”

    Omotosho, however, pointed out that the paints industry is not the only area where the import syndrome is playing out. He said the automotive industry, for instance, is also hard hit. “About the same time TATA got licensed to produce spares for Mercedes Benz trucks in India, the one in Enugu (ANAMCO) got theirs. But where are we today?” he asked.

    According to him, the volume of spares produced in Nnewi, Anambra State, could be used basically to replace import of spare parts for vehicles. “If you don’t have a place where you have that assembly and things start to integrate backwards, you continue to rely on importing fully built vehicles, which is what you have today,” he said.

    While emphasising that a lot of materials used in the production of goods are available locally, the industrialist  regretted that those who should be developing local raw materials would rather go and import them and sale. “There is need for the 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 input produced locally,” he insisted.

    He noted that putting RMRDC back on track is similar to the 10 per cent local content in the oil and gas industry. He said developing local substitute for imports by reviving RMRDC in line with the local content initiative in the oil and gas industry was necessary if Nigeria must realise her dream of becoming an industrialised nation.

    “After satisfying her local needs, Nigeria may even end up exporting to other countries,” he said, noting: “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.”

    He said the government could encourage the drive for local substitution for raw materials through some sort of incentives since the government is mostly affected by the problem of import syndrome.

    “There has to be that facility provided or promoted through or by Ministry of Industry for production of local raw materials,” he argued, pointing out:“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.”

    The Chairman of DN Meyer also argued that by doing so, Nigeria will stop creating employment for others, particularly in a country where the rate of graduate unemployment is very high.

    “You must realise that those who are selling to you are not producing them here; they import and sell to you. Even when some of them say they have their own factory, they bring the raw materials and add some additives and sell to you. You can still do better than that because some of those basic things they are using to which they add some other agents can be produced here if we are dedicated and organised,” he admonished.

  • Fed Govt seeks $200m loan from Germany for real sector

    The Federal Government is to secure a $200 million (about N32 billion) loan from Germany.

    The German Minister for Economic Planning and Development,  Gerd Mueller and other top German officials and businessmen are in talks with the Federal Government on the facility, as well as other areas of investment and cooperation with Nigeria.

    Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, who hosted the delegation, which also included the German Ambassador to Nigeria, Janetzke Wenzel, in Abuja, said Germany has a strong development bank, adding that Germany was fascinated by how the country built such a successful institution.

    She said the quest to replicate such an institution in Nigeria that would cut interest rate to boost investment and ensure the growth of the real sector inspired the Federal Government to seek the establishment of a development finance institution.

    The minister hinted that the Federal Government was seeking the  loan at concessionary rate. Although information on the proposed loan was sketchy, Mrs Okonjo-Iweala had earlier met  with Mueller, Wenzel and other officials and businessmen to discuss  areas of economic cooperation between both countries.

    Mrs Okonjo-Iweala urged German investors to cash in on the great potential available in various sectors of the economy, including power, creative industry, agriculture and infrastructure.

    She noted, for instance, that the nation’s creative industry, particularly Nollywood, creates over 200,000 jobs yearly, urging German

    Sources close to the meeting said  Mrs Okonjo-Iweala is billed vist Germany soon for further discussions.

    The Federal Government last year unveiled plans to set up a development finance institution to provide long-term, low interest finance to the real sector as part of efforts to grow the economy.

  • Manufacturers’ unending woes

    The Boko Haram insurgency has added to the economy’s problem.  It has killed local manufacturing, especially Small and Medium Scale Enterprises (SMEs). There are fears over its consequences for investment and job creation. CHIKODI OKEREOCHA and OKWY IROEGBU-CHIKEZIE report. 

    For the Managing Director, Spectra Industries Limited, makers of Suco beverages, Mr. Duro Kuteyi, these are trying times. The industrialist and National Vice Chairman of Nigeria Association of Small Scale Industrialists (NASSI) is worried that  Boko Haram’s insurgency is taking a toll on his company.

    He told The Nation that because his company’s distributors are in the Northeast and Northcentral – the epicentre of the sect’s activities – the fortunes of his company have dwindled.

    The  industrialist said: “Our core business is in the North, and our distributors complain of low sales as people are scared of visiting the markets or big malls; customers take their time to shop because of bomb scare.”

    Customers, he said, were skeptical about the safety of doing business or even doing their personal shopping, so the situation has affected his company’s profitability. “The security situation, especially the bombings and kidnappings are affecting our business,”he emphasised, adding that as a result, thedistribution of locally manufactured goods has been hampered.

    Also, the Chairman, Export Group of Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Mr. Oluyenuwo Olabisi, is disturbed over the effects of the prevailing insecurity on businesses and the manufacturing sector.

    He said the insurgency has created so much fear in people that nobody wants to risk his life for anything. He said some people prefer to  move from one place to the other for safety. He explained that people from the south and west no longer go to the north to buy anything, especially produce, because of the risks.

    According to Olabisi, what obtains is that northerners bring the produce down to the south, a situation which makes the products more expensive, as there are more middle men than ever. He said, for instance, since the crisis escalated, the price of produce, such as sesame seed, cotton, ginger, and cashew, among others, has gone up, thereby, constituting a drag on commodity export business.

    He said: “People don’t want to go to the North anymore for any reason. This is affecting the distributive trade sector of the economy. The worse hit in this restriction in movement are operators in the small and medium scale enterprises (SMEs) sector due to their limited space, branch network and available funds.”

    The agonies of Kuteyi and Olabisi echo those of other manufacturers and members of the Organised Private Sector (OPS).Last week,the Lagos Chamber of Commerce and Industry (LCCI) lamented that Boko Haram activities are affecting investor’ confidence and limiting the economy’s potential in the wake of the rebased Gross Domestic Product (GDP).

    Its President, Alhaji Remi Bello, lamented that it is difficult to attract investors because the risk of long-term investments had become enormous. “The tempo of economic activities in the Nort has declined, access to markets by companies in the south has reduced, resulting in loss of sales; while many enterprises have relocated,” he said.

    Bello argued that security of lives and property is crucial to investment. Noting that investment growth is imperative for job creation, poverty reduction and social stability, he said persistent insecurity impacts negatively on the economy, while declining private sector performance could result in job losses, which could aggravate the state of insecurity.

    The Chamber’s Director-General (DG), Muda Yusuf, agrees with him. He noted that the security situation has become a major challenge for investors, stressing that the economy of many of the affected states is on the verge of collapse with implication for investments and job losses.

    The DG spoke in Lagos while explaining the outcome of an evidence-based account of experiences of members of the Chamber and the larger business community on investment climate in the second quarter business report.

    Yusuf said the challenges of the operating environment for business intensified in the second quarter across all sectors, and there were concerns over weak consumer demand reflecting the downturn in the economy. He said while the hospitality industry in the volatile states has been paralysed, many operators, especially SMEs, were relocating to other states with the attendant challenges.

    He also said many firms have lost about 30 per cent of their sales, as they could no longer access most part of the northern market.

    “Our report shows that manufacturing firms sourcing raw materials from the North are facing serious challenges, while projects funded by banks in the affected states are now at risk,” Yusuf said, adding that serious perception problem has been created for the country, as many bank branches have been closed, while sales representatives of many companies have fled the affected states, and many projects under construction in the North abandoned.

    Yusuf said the way the country’s investment climate is, it is more attractive to invest in government securities than invest in ventures that would create jobs. He said banks  prefer to buy treasury bills and government bonds than give loans to investors, adding that the credit and interest rate structure would continue to create distortions in the economy, which will only perpetuate the phenomenon of jobless growth and further depress the stock market.

    The DG of Nigeria Economic Summit Group (NESG), Mr. Frank Nweke (Jnr.), is no less worried over the implications of the security situation.To him,the administration’s efforts to attract the much-needed foreign investment (FDI) and transform the economy would not yield the desired result if such attacks do not cease. He said no foreign investor would invest in an insecure environment. “We are talking of bringing in more investors. While it is a nice thing to do, we also have to see the link between security and investment. Even local investors will not go to places that are not secure,” he said.

    For local investors and manufacturers, the prevailing insecurity is an unfortunate addition to their long list of woes. For instance, manufacturers have been complaining of various challenges of doing business, such as high lending rates, lack of long-term credit facilities, and lack of infrastructure, particularly electricity, inconsistent government policies, and multiple taxation.

    Such challenges combine to make the cost of business high. And in most cases, consumers, ultimately, bear the burden in form of high cost of goods and services. Many manufacturing firms who could not cope with the rising cost of production have either closed shop or relocated to neighbouring countries were the business environment is considered friendly. This exacerbated the unemployment situation in the country.

    The cost of insecurity could also be seen on the percentage of yearly budget allocation to the security sector since 2009 when the crisis started. Much of the votes that would have been channelled into bridging the wide infrastructure gap that has been a pain in the neck of manufacturers are allocated to security. For instance, out of the N3,049 trillion budget for 2009, a total of N176 billion was allocated to security, that is, six per cent of the budget.

    By the following year, security vote increased to N448 billion, representing 11 per cent of N4, 239 trillion was budgeted.

    By 2011, security got N1, 040 billion from the N4, 972 trillion budget, a 21 per cent increase in vote. The security sector was apportioned the lion’ss share of N922 billion from the N4, 888 trillion for that year, a 19 per cent increase. Yet power, which constitutes the single critical infrastructure to rev the manufacturing sector and create jobs got a paltry N161.42 billion. Even agriculture, which holds the key to unlocking the potential in the economy got N78.98 billion.

    Other critical sectors, such as education, health aviation, and transport got smaller allocation. The situation did not change much in the 2013 budget where security got N668 billion out of the total N4, 987trillion budget.

    The consensus of experts is that there are no criteria to quantify the loss to the economy considering the almost daily loss of lives and property to insecurity. Beyond the psychological trauma, industry operators say where manufacturing companies are closing in the north and relocating to other African countries for fear of bomb attacks, leaving the few remaining ones operating at below capacity, does not augur well for Nigeria where youth unemployment is put at 24 per cent.

    For Bello, the government must intensify efforts to eliminate local factors that predispose the citizens to extremism. He listed the conditions to include poverty, inequality unemployment and illiteracy.

    Time, they say, will tell. But unless this is done, experts say the economy would continue to hemorrhage, literally.

  • Manufacturing grew by 36.9 per cent in 2013, says MAN

    Massive  investments in the last two years, stability in macro-economic indices and various government incentives channeled towards the manufacturing sector resulted in improved performances recorded in the sector at the end of 2013, the Manufacturers Association of Nigeria (MAN) has said.

    MAN, in its economic review for 2013  said manufacturing output increased by about 36.9 per cent, as against 19 per cent in mid-year report of the period under review.

    According to the report,  about 121 per cent increase was recorded for the same period (end of the year) in 2012, translating to N483.53 billion at the end of December 2013. This is  against N353.2 billion recorded in mid-year of 2013.

    The association attributed the improvement to several factors, which include stability in macro-economic indices, increased investment by operators and various government incentives channeled towards the sector.

    The country’s real Gross Domestic Product (GDP), for instance, according to the report, grew by 6.93 per cent in the third quarter of 2013, which was higher than the 6.18 per cent in the second quarter of 2013, and 6.48 per cent in the third quarter of 2012.

    The economy, the review said, recorded an inflation rate of 8 per cent (year-on-year) in December 2013. The December 2013 inflation was 0.1 per cent higher than 7.9 per cent in November 2013, and 0.2 per cent higher than 7.8 per cent recorded in October 2013, as government consolidated on policies that ensured inflation remained low.

    Similarly, according to the review, exchange rate remained fairly stable at the Wholesale Dutch Auction System (WDAS) segment of the market. “Foreign exchange demand by the authorised dealers for Q3 2013 was estimated at US$10.12 billion, indicating an increase of 24.4 per cent and 53.1 per cent above the levels in the preceding quarter (Q2) of 2013 and the corresponding period of 2012 (Q3 2012),” it said.

    The review said the nation’s external reserves increased to US$45.37 billion as at November 2013 from US$44.10 billion at the end of the third quarter of 2013, which experienced a decline of 1.95 per cent below the US$44.96 billion recorded at the end of the 2nd quarter of 2013.

    The value of Nigeria’s export trade totaled N3, 573.4 billion in the third quarter of 2013, accounting for 63.2 per cent of total trade value. Crude oil contribution to exports, however, increased from 72.4 per cent in the second quarter of 2013 to 86.4 per cent in the third quarter of 2013

    The Review  also stated  that  imports stood at N2,084.8 billion in the third quarter of the same year, representing an increase of N486.5 billion(30.4 per cent) from N1,598.2 billion recorded in the second quarter of 2013.

    “This increase was as a result of the rise in the import value of machinery and transport equipments, beverages and tobacco and food and live animals, among others,” the report said.

    The review estimated the manufacturing sector’s capacity utilisation for the end of the year stood at an average of 52.7 per cent as against 46.3 per cent at the mid year. “This is an appreciable performance when compared to the same period last year, which recorded an average of 46.6 per cent,” it said.

    According to the review,  information from manufacturers showed that most of them seemed to have found ways of adapting to local raw materials.

    “Aggregate inventory information revealed that as at the end of last year, manufacturers had reduced the level of inventory of finished goods by 35 per cent from what was obtained as at mid –year. In value terms, the level of inventory has reduced from N21.75 billion to N17.34 billion,” it said.

    The improved performance recorded in manufacturing output, capacity utlilisation, and employment, according to the review, were results of massive investments by members in the last two years.

    MAN,however, regretted that surveys carried out across various sectors revealed that members’ access to credit, particularly for expansion, has been priced at high rates ranging from an average of 17 to 21 per cent.

    It noted that it was because electricity supply remained a major challenge to manufacturing as it dipped by 450 Mega Watts (MW) from the peak generation of 4,517 MW.

    The MAN’s review also revealed that manufacturers are still grappling with high tariffs under the Multi-Year Tariff Order (MYTO) designed by the Nigerian Electricity Regulatory Commission (NERC) despite reduced availability of power supply.

    The association in the review, however, pointed out that the challenges limiting the potentials of the manufacturing sector are surmountable. It expressed optimism that “the sector would pick up this year provided there are no distortions in the macroeconomic stability as well as security threats or environmental disasters.

    “It is also hoped that the international oil market will remain stable and Federal Government will continue to extend fiscal and other incentives and support to the manufacturing sector,” it said.

  • Manufacturers’ unending woes

    The Boko Haram insurgency has added to the economy’s problem.  It has killed local manufacturing, especially Small and Medium Scale Enterprises (SMEs). There are fears over its consequences for investment and job creation. CHIKODI OKEREOCHA and OKWY IROEGBU-CHIKEZIE report

    For the Managing Director, Spectra Industries Limited, makers of Suco beverages, Mr. Duro Kuteyi, these are trying times. The industrialist and National Vice Chairman of Nigeria Association of Small Scale Industrialists (NASSI) is worried that  Boko Haram’s insurgency is taking a toll on his company.

    He told The Nation that because his company’s distributors are in the Northeast and Northcentral – the epicentre of the sect’s activities – the fortunes of his company have dwindled.

    The  industrialist said: “Our core business is in the North, and our distributors complain of low sales as people are scared of visiting the markets or big malls; customers take their time to shop because of bomb scare.”

    Customers, he said, were skeptical about the safety of doing business or even doing their personal shopping, so the situation has affected his company’s profitability. “The security situation, especially the bombings and kidnappings are affecting our business,”he emphasised, adding that as a result, thedistribution of locally manufactured goods has been hampered.

    Also, the Chairman, Export Group of Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Mr. Oluyenuwo Olabisi, is disturbed over the effects of the prevailing insecurity on businesses and the manufacturing sector.

    He said the insurgency has created so much fear in people that nobody wants to risk his life for anything. He said some people prefer to  move from one place to the other for safety. He explained that people from the south and west no longer go to the north to buy anything, especially produce, because of the risks.

    According to Olabisi, what obtains is that northerners bring the produce down to the south, a situation which makes the products more expensive, as there are more middle men than ever. He said, for instance, since the crisis escalated, the price of produce, such as sesame seed, cotton, ginger, and cashew, among others, has gone up, thereby, constituting a drag on commodity export business.

    He said: “People don’t want to go to the North anymore for any reason. This is affecting the distributive trade sector of the economy. The worse hit in this restriction in movement are operators in the small and medium scale enterprises (SMEs) sector due to their limited space, branch network and available funds.”

    The agonies of Kuteyi and Olabisi echo those of other manufacturers and members of the Organised Private Sector (OPS).Last week,the Lagos Chamber of Commerce and Industry (LCCI) lamented that Boko Haram activities are affecting investor’ confidence and limiting the economy’s potential in the wake of the rebased Gross Domestic Product (GDP).

    Its President, Alhaji Remi Bello, lamented that it is difficult to attract investors because the risk of long-term investments had become enormous. “The tempo of economic activities in the Nort has declined, access to markets by companies in the south has reduced, resulting in loss of sales; while many enterprises have relocated,” he said.

    Bello argued that security of lives and property is crucial to investment. Noting that investment growth is imperative for job creation, poverty reduction and social stability, he said persistent insecurity impacts negatively on the economy, while declining private sector performance could result in job losses, which could aggravate the state of insecurity.

    The Chamber’s Director-General (DG), Muda Yusuf, agrees with him. He noted that the security situation  has become a major challenge for investors, stressing that the economy of many of the affected states is on the verge of collapse with implication for investments and job losses.

    The DG spoke in Lagos while explaining the outcome of an evidence-based account of experiences of members of the Chamber and the larger business community on investment climate in the second quarter business report.

    Yusuf said the challenges of the operating environment for business intensified in the second quarter across all sectors, and there were concerns over weak consumer demand reflecting the downturn in the economy. He said while the hospitality industry in the volatile states has been paralysed, many operators, especially SMEs, were relocating to other states with the attendant challenges.

    He also said many firms have lost about 30 per cent of their sales, as they could no longer access most part of the northern market.

    “Our report shows that manufacturing firms sourcing raw materials from the North are facing serious challenges, while projects funded by banks in the affected states are now at risk,” Yusuf said, adding that serious perception problem has been created for the country, as many bank branches have been closed, while sales representatives of many companies have fled the affected states, and many projects under construction in the North abandoned.

    Yusuf said the way the country’s investment climate is, it is more attractive to invest in government securities than invest in ventures that would create jobs. He said banks  prefer to buy treasury bills and government bonds than give loans to investors, adding that the credit and interest rate structure would continue to create distortions in the economy, which will only perpetuate the phenomenon of jobless growth and further depress the stock market.

    The DG of Nigeria Economic Summit Group (NESG), Mr. Frank Nweke (Jnr.), is no less worried over the implications of the security situation. To him, the administration’s efforts to attract the much-needed foreign investment (FDI) and transform the economy would not yield the desired result if such attacks do not cease. He said no foreign investor would invest in an insecure environment. “We are talking of bringing in more investors. While it is a nice thing to do, we also have to see the link between security and investment. Even local investors will not go to places that are not secure,” he said.

    For local investors and manufacturers, the prevailing insecurity is an unfortunate addition to their long list of woes. For instance, manufacturers have been complaining of various challenges of doing business, such as high lending rates, lack of long-term credit facilities, and lack of infrastructure, particularly electricity, inconsistent government policies, and multiple taxation.

    Such challenges combine to make the cost of business high. And in most cases, consumers, ultimately, bear the burden in form of high cost of goods and services. Many manufacturing firms who could not cope with the rising cost of production have either closed shop or relocated to neighbouring countries were the business environment is considered friendly. This exacerbated the unemployment situation in the country.

    The cost of insecurity could also be seen on the percentage of yearly budget allocation to the security sector since 2009 when the crisis started. Much of the votes that would have been channelled into bridging the wide infrastructure gap that has been a pain in the neck of manufacturers are allocated to security. For instance, out of the N3,049 trillion budget for 2009, a total of N176 billion was allocated to security, that is, six per cent of the budget.

    By the following year, security vote increased to N448 billion, representing 11 per cent of N4, 239 trillion was budgeted.

    By 2011, security got N1, 040 billion from the N4, 972 trillion budget, a 21 per cent increase in vote. The security sector was apportioned the lion’s share of N922 billion from the N4, 888 trillion for that year, a 19 per cent increase. Yet power, which constitutes the single critical infrastructure to rev the manufacturing sector and create jobs got a paltry N161.42 billion. Even agriculture, which holds the key to unlocking the potential in the economy got N78.98 billion.

    Other critical sectors, such as education, health aviation, and transport got smaller allocation. The situation did not change much in the 2013 budget where security got N668 billion out of the total N4, 987trillion budget.

    The consensus of experts is that there are no criteria to quantify the loss to the economy considering the almost daily loss of lives and property to insecurity. Beyond the psychological trauma, industry operators say where manufacturing companies are closing in the north and relocating to other African countries for fear of bomb attacks, leaving the few remaining ones operating at below capacity, does not augur well for Nigeria where youth unemployment is put at 24 per cent.

    For Bello, the government must intensify efforts to eliminate local factors that predispose the citizens to extremism. He listed the conditions to include poverty, inequality unemployment and illiteracy.

    Time, they say, will tell. But unless this is done, experts say the economy would continue to hemorrhage, literarily.