The activities of Boko Haram have affected the manufacturing sector. From billions of dollars in financial losses by manufacturers to monumental decline in Foreign Direct Investment (FDI) and job losses, the economy is left gasping for breath. Assistant Editor CHIKODI OKEREOCHA writes that unless President Muhammadu Buhari halts the sect, more manufacturers, especially those in the Northeast, may quit
AT would probably go down as the most challenging period in its over 50 years operation in Nigeria. Between November, last year and April, this year, a period of six months, Lafarge Africa incurred financial losses of N2.5 billion as a result of the Boko Haram insurgency in the Northeast. The company, which recently merged with Switzerland-based Holcim, to create the most advanced building materials group, incured the heavy losses because it could not meet its sales projections due to the insecurity in the region.
Although normalcy has since returned to the company’s operations, according to its Group Managing Director/Chief Executive Officer, Guillaume Roux, the N2.5 billion financial losses is not the company’s only worry. Lafarge Africa is also worried about the threat Boko Haram poses on it’s over $100 billion business expansion drive, particularly in the northern region.
Roux said: “Today we have up to 8.5 million tonnes in the country and we want to double that capacity in the next five years. We are expanding in Calabar and we want to expand in the north. So this project of $100 billion expansion in the north is key because there’s a market; it’s key because there’s growth and it’s been an essential project for us.”
The Lafarge Chief Executive Officer, who spoke in Abuja shortly after a meeting with the Presidential Initiative on the Northeast (PINE) to finalise discussions on the role the cement company will play in the long term economic development of the Northeast, said supporting the security, recovery and stability of the region had become critical to the future of its over $100 billion business expansion drive in the region.
According to him, the assets and plants the company has in the north are very strong and competitive. “We want to make sure the right conditions are there. Security is essential-without security obviously we cannot invest. The economic development is essential, so we need to help,” he said.
Roux further said the company had demonstrated its commitment to business expansion in the region through the ground breaking of an expansion project that was meant to grow Ashakacem capacity from the current one million metric tonnes to four million metric tonnes.
His words: “Lafarge is a long term investor and this necessitates uninterrupted operations despite the insurgency that we have witnessed in recent times. Of course, we seen security as a key ingredient for our continued operations and this is why we are a willing ally with PINE in restoring normalcy and rebuilding the region.”
However, Lafarge Africa is only an addition to the long list of manufacturing firms in Nigeria desperately craving uninterrupted operations and is ready to give an arm literarily for the restoration of normalcy in the devastated region. Boko Haram’s insurgency is also taking a huge toll on Spectra Industries Limited, makers of Suco beverages.
Its Managing Director, Mr. Duro Kuteyi, told The Nation that because his company’s distributors are in the Northeast and Northcentral – the epicenter of the sect’s activities, the fortunes of his company have dwindled.
Kuteyi, who is also National Vice Chairman of Nigeria Association of Small Scale Industrialists (NASSI), lamented: “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, are 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 lamented, adding that as a result, the distribution of locally manufactured goods has been hampered.
Indeed, these are trying times for manufacturers. The protracted armed insurrection has ruined their businesses, and by extension, the national economy. Real sector operators especially manufacturers including members of the Organised Private Sector (OPS) are agonising over the implications of the continuous erosion of investor’ confidence on the economy as a result of the sustained bombing campaigns of the militant group.
President, Lagos Chamber of Commerce and Industry (LCCI), Alhaji Remi Bello, is one of those who are worried. He said at moment, it is extremely difficult to attract investors because the risk of long-term investments had become enormous. Hear him: “The tempo of economic activities in the North has declined; access to markets by companies in the south has reduced, resulting in loss of sales; while many enterprises have relocated.”
While noting that security of lives and property is crucial to investment, Bello said investment growth is imperative for job creation, poverty reduction and social stability.
Besides, persistent insecurity, he stated, impacts negatively on the economy, while declining private sector performance result in job losses, which in turn aggravate the state of insecurity. It is easy to see why manufacturers and other business operators are screaming blue murder. While some manufacturers have closed down their operations in the Northeast, Managing Consultant, Nesbet Consulting, a Lagos-based firm of finance and management consultancy, Mr. Alaba Olusemore, said those who manage to operate contend with poor sales and declines in revenue.
Olusemore said most companies are finding it extremely difficult to move their goods to the affected states in the Northeast, resulting in glut of manufactured goods, particularly in the Fast Moving Consumer Goods (FMCG) segment. This is because most transport and haulage companies have either reduced their business activities and trips to the North or avoided the area completely.
For real sector operators, especially manufacturers who are already bogged down by rising cost of production and lately, economic uncertainty around issues of exchange rate occasioned by the devaluation of the naira in the wake of the sharp drop in price of crude oil, this is considered overkill. Indeed, as things are, local manufacturers are gasping for breath.
Killing spree spiral out of control
These are scary times for Nigerians and the economy.The Boko Haram insurgents are back this time with more ferociousness. It is not that at some point they halted their bombing campaign. Rather, six weeks into the postponement of the general elections, sustained military offensive yielded tangible results by dispersing the sect members and regaining some lost territories.
However, since the inauguration of the President Muhammadu Buhari administration on May 29, there has been resurgence. The carnage seems to have become a daily occurrence, as no day passes without gory details of huge casualties from suicide bombing by the dreaded group.
As Founder, Forenovate Technologies Ltd, an Abuja-based security risk management consultancy/ICT training firm, Mr. Don Okereke, put it, “The military offensive resulted in dispersing the sect members; those that survived the onslaught on their Sambisa camp quickly melted into mainstream society and they are trying to regroup or carry out sporadic attacks.
“I think they (Boko Haram) went back to their earlier tactics: using roadside Improvised Explosive Device (IEDs) and ‘Sunday Sunday’ attacks on churches, random drive-by killings, hit-and-run attacks on police/military formations and their latest invention – suicide bombings.”
He said having been largely decapitated, it is doubtful if Boko Haram still has the capacity to hold territories. “What they are doing now can also stem from desperation,” Okereke told The Nation, noting however, that Boko Haram insurgency has crippled the economy of many of the northern states.
According to him, no organisation or individual can thrive in an atmosphere of uncertainty and wanton killings. “Every business, big and small, even individuals need some level of stability certainty to plan and execute their programmes. Many companies in the north generally and the North-East in particular have closed shops.
“The manufacturing sector seems to be the hardest hit because electricity supply, telecommunication services and other amenities have been crippled in those areas. Even the requisite manpower that the industries need is not there any longer for obvious reasons,” he said.
He pointed out that majority of his friends and family members scattered in the north have relocated to the Southern states sequel to the Boko Haram killing spree. With a voice tinged with anger and frustration, Okereke narrated how a friend of his who lived in Katsina State for nearly 25 years before the insurgency started was forced to relocate his family to Ebonyi State.
But the annoying part of the narrative perhaps, was how Okereke’s friend’s one million naira investment in real estate in Katsina was priced for N200, 000 when he wanted to move back to the east. “Someone I know used to travel to Borno to buy dried fish (Mangala), but he has since stopped.
“Another one used to buy water melon from one of the northern states, but also stopped,” Okereke said, adding that there is a plethora of cases like this, which has a multiplier-effect on prices of foodstuff in the Nigerian market since many folks can’t go to the north where some of these things are cheaper.
FDI inflow dries up
For real sector operators and indeed, government, the dry up of Foreign Direct Investment (FDI) due to rising insurgency is a bitter pill to swallow. Since 2009 when the group forced their way into national consciousness for all the wrong reasons, FDI has been dropping sharply, sending shock waves down the spine of the authorities.
This is so particularly since last year when declining price of oil in the international market caused serious fiscal upsets for Africa’s largest economy. For instance, the World Investment Report (WIR) 2013 says FDI flows into Nigeria dropped by 21 per cent in just one year – from $8.9 billion in 2011 to $7 billion in 2012. This translates to loss of $1.9 billion, a figure considered unacceptable for a country in dire need of shoring up its revenue.
That is not all. Nigeria’s economic growth rate is also far from inspiring because of insurgency. For instance, figures from the National Bureau of Statistics (NBS) released sometime in 2014 indicated a drop in first quarter growth to about 6.21 per cent, from 6.77 per cent obtained in the fourth quarter of 2013.
Citing the ‘Global Peace Index’ rankings for 2014, which rated Nigeria second most deadly country for terrorism after Iraq, experiencing 140 per cent increase in deaths to about 4,392, Okereke said the consequence of this is that economic activities in those areas are being crippled daily.
“From manufacturing/production to retailing, hospitality to tourism, real estate to agriculture; virtually every business activity and human endeavour is at the receiving end of this insurgency/terrorism,” the UK-trained Security Analyst told The Nation.
Hospitality industry hit
A negative perception problem created for Nigeria by the insurgents is not only responsible for the drop in FDI and slowing growth rate, but also responsible for the dwindling fortunes of operators in the hospitality industry. “Tourism and hospitality is comatose in most northern states,” Okereke pointed out, adding that even places of worship considered sacred are not spared by the rampaging sect.
He said at moment night life has disappeared in most of the northern states, with telling effect on hotel owners/operators’ profitability.
According to him, most people now remain indoors as early as 6pm to 7pm.
“Nobody wants to go to a place that is insecure. Remember that terrorists bask on exerting mass casualties hence they mostly target places with high population,” he said.
To drive home his point that businesses in the northeast part of the country are fast losing grip because of the Boko Haram carnage, he said: “I was born in the North, a place I still have a strong affinity for. I vividly recall childhood experiences of all members of my family sleeping under Dogonrayo (neem) trees from dusk to dawn due to the high temperature with no threat to our lives or property. But not anymore.”
The Nation learnt that since the insurgents started their operations, the region has continued to witness the lowest tourists’ arrival, including business visits. Also, there has not been any opening of an international branded hotel. Most amusements parks, eateries, restaurants, bars, and other public relaxation points have closed, as people heed calls by security experts and the authorities to avoid such places.
With sharp reduction in occupancy rate of hotels and recreation facilities, the implication is that states considered Boko Haram hot spots continue to lose huge revenues that would have been accruing to them as tax and other tourism-related businesses, including revenues from parks, new bars and restaurants that would have sprang up.
Banks, insurance
companies, others close shop
Many branches of banks and insurance companies have closed shop, even as sales representatives of many companies have fled the affected states in the north. Tales about of how Boko Haram insurgents blow up banks with IEDs and empty their vaults to fund their operations, killing scores of innocent bank customers in the process abound.
Also, many company projects under construction in the North have either been abandoned or suspended. Many operators, especially Small and Medium Enterprises (SMEs) have since relocated to other states thus, putting more pressure on limited facilities in those states. The rush to escape from the northern part of the country hard hit by insurgency has seen the profitability of businesses in that region hitting an all time low due to decrease in economic activities.
The way out
No one envies Buhari. He inherited an economy on the edge of a precipice. But the burden of fixing the economy appears to pall into insignificance compared to the current pressure on him by Nigerians and members of the international community to urgently wrest Nigeria from Boko Haram’s iron grip. Reining in the insurgents, experts say, holds the key to repositioning the economy.
For a start, Okereke said in the short/medium term, there is need for continued military offensive in an effort to completely decapitate the insurgents, dismantle their networks (arms/technical supply), and go after their sponsors.
The security expert said while military action tackles the symptom of the disease, other actions to eliminate the causative agents, which constitute long term solutions, must also be pursued with vigour.
“Terrorism/insurgency basks on unemployment, extreme poverty, injustice and brainwashing by run-off-the-mill-religious fanatics with warped ideologies.
“It follows that these precursors must be addressed too. As this is being done, there is also need for a ‘battle of hearts and minds’: wean or de-radicalise remorseful violent extremists of their distorted belief system,” he recommended.
“He also said military offensive alone will not end extremism especially when the ideology that drives the concept has become fully enshrined. “A holistic approach will do,” he advised.
Criminologist/lecturer,Sociology Department, Imo State University, Owerri, Dr. Dan Nkwocha, agrees on the need to go after sponsors of Boko Haram. “The sponsors of the group should be uncovered,” he told The Nation, pointing out that doing so would enable the administration implement a comprehensive and coordinated response against the insurgents.
Will Buhari heed wise counsels? The coming weeks and months will tell.
