The Nation Newspaper

Tag: manufacturing

  • Global firm to begin manufacturing in Nigeria

    Philip Morris International (PMI), the world’s largest tobacco company, with operations in 181 countries, has finalised plans to begin manufacturing in Nigeria before the end of the year.

    According to the Managing Director of PMINTL Nigeria Limited, Mr. Coskun Kagan Dicle, the investment comes in less than two years of starting operations in Nigeria, adding that this indicates the confidence the company has in the  economy.

    On entering Nigeria last year, PMI took the opportunity provided by the Economic Community of West African States (ECOWAS) Trade Liberalisation Scheme (ETLS) to bring its brands from its manufacturing plant in Senegal. This was in keeping with the company’s regionalisation policy.

    “We are proud to be in Nigeria at a time when economic diversification is so critical to Nigeria’s long term economic objectives. Our company was incorporated in December 2014 and, during 2015, received all regulatory approvals required to commence importation of some of our world-class brands into Nigeria under the ETLS from our factory in Senegal,” Dicle said.

    He, however, said in pursuit of its long-term objectives, the company entered into a strategic agreement with International Tobacco Company Limited (ITC) to commence the manufacturing before the end of the year.

    “We are proud that in less than two years of our presence in Nigeria, we have already reached the stage of starting local manufacturing, which has been possible thanks to the relentless efforts of our strong team of Nigerian talents passionate and dedicated to contributing to the economy,” Dicle said.

    He explained that through the agreement, PMI would invest in technology and capacity building in ITC’s factory to create more employment, and that over the medium term, PMI intends to make further investments in manufacturing.

    On the benefits, Dicle said: “We believe that this undertaking will benefit all parties involved. While our consumers will have their preferred quality brands readily available, the locals at Ilorin and environs will benefit in several ways, including employment.”

    He said PMI also invested in agronomy, including some countries in Africa, through their leaf suppliers, who are reaching over 200,000 farmers.

    Similarly, PMINTL Nigeria, he added, was exploring the possibility of working with local business partners to share its technological know-how and deploy good agricultural practices in obtaining high-quality crops, high yields and good income for farmers, while minimising the environmental impact and fostering sustainability.

    “Over time, should PMI quality standards be met, we believe this could help the achievement of agricultural objectives of the government and could also become a contributor to foreign currency earnings through exports. The various arms of government would earn necessary income from levies, duties and taxes, with ITC being able to put its manufacturing facilities to good commercial use,” Dicle added.

    On how his company would continue to meet demand in the market before the kick-off of local manufacturing, he said it had secured the approval of the relevant authorities  to import from its manufacturing facility from Senegal.

  • Manufacturing on my mind

    All over the world, nations are facing stresses from series of challenge – population growth, structural changes in the world economy, rural-urban migration, environmental degradation and rapid social change. One defining feature in all these is that societies with institutions, rules and norms for managing challenges and well established traditions of governance are generally better able to accommodate peacefully to change. Those with weaker governance, fragile social bonds and little consensus on values or traditions, on the other hand, are more likely to buckle.

    At the 43rd Annual General Meeting of the Manufacturers Association of Nigeria (MAN) last year, the association discussed “The Future of the Manufacturing Sector” as its theme. The association, before then, had been hammering on the precarious state of the sector for years. Industries were closing shop in droves because of the harsh operating environment and the dearth of critical infrastructure like power. The situation is even direr than it was last year.

    Dr. Thabo Mbeki, former President of South Africa was the guest speaker. The choice of Mbeki, according to MAN President, Dr. Frank S. Udemba Jacobs was because “of his antecedents and achievements as President of South Africa.” During Mbeki’s tenure, The South African economy grew at a yearly rate of 4.5%. Similarly, massive employment was created in the middle sector of the economy, leading to the creation of a large pool of middle class, especially with the implementation of Black Economic Empowerment, which led to a high demand for trained professionals. South Africa also attracted enormous foreign direct investment, making it the focal point of African growth.

    During his lecture, he pointed out that Africa loses at least $50 billion every year through trade mis-pricing which would make an important and positive contribution to the continent’s development efforts including industrialisation. Mbeki called for “national cooperation” in developing an “Industrial Revolution Plan…to defeat the scourge of illicit financial outflows.” He suggested that MAN and the rest of the corporate sector should take it as one of their tasks in the context of the industrialisation of Nigeria to join hands with the government and civil society to fight against illicit financial outflows.

    This “illicit financial outflow” is almost bringing the country to its knees because of the huge demands for billions of dollars to import goods, even goods we have capacity to produce. In times like these, we need our industries now more than ever.

    The United Nation (UN) predicts that by 2050 there will be 2.5 billion Africans – a quarter of the world’s population. Because of this and other predictions, Africa has remained the toast of investors who would not want to miss the opportunity of investing in an emerging market with such huge population. But things have started changing the way few predicted. The way things stand presently, four of Africa’s biggest economies are showing strains.

    Nigeria, South Africa, Angola and Kenya, the four leading economies, are seriously affected by the fall in oil and commodity prices. Nigeria relies on oil for 70% of government revenue and accounts for 90% of export revenue. That leaves very little room to adjust the country’s budget. From an economic point of view, that can only mean one thing – slower growth. As a result, growth prediction is fixed now at 2.3%, the lowest rate in 15 years, according to the IMF. We have drawn down on our currency reserves and implemented capital controls, making access to dollars very difficult. In an economy that relies on imports, the controls have made life difficult for citizens and companies.

    All these point to one thing: the country’s future is in the balance. Whether it bounces back from this commodity slump or slips back into financial impunity of the past will depend on whether our leaders have the will and determination of moving forward.

    For me, two things are crucial. The first is to recognise the new reality. Given the decline in our terms of trade, Nigeria’s buying power has gone down. We are not in this boat alone as other governments are being forced to adjust to this reality which is also affecting rich Gulf nations like Saudi Arabia, Qatar, Kuwait and others.

    The second is to focus on people, infrastructure and industrialisation. In recent years, the Economist and popular publications alike have argued that Nigeria, and indeed, Africa was on the threshold of an economic boom. Pointing to a decade of high growth and increased foreign investment, this argument held that the continent was finally on track to leave its long years of poverty and under-development behind. Some even said that Africa could become the next global economic powerhouse, following in the footsteps of East Asia.

    However, with this new reality, this position is now contentious for one obvious reason: weak or no industrial base. Nigeria’s growth would not be real, lasting, or beneficial until it is based on manufacturing rather than exporting raw commodities. Rather than focusing on the hype of mobile phones, we should ask critical questions and study some basic development indicators: Was manufacturing increasing as a percentage of GDP? Were the goods we exported becoming more valuable – finished products rather than raw materials?

    It is instructive to note that a 2011 U.N. report looked into these questions, and found that Nigeria and most African countries are either stagnating or moving backwards when it comes to industrialisation, quite unlike the East Asian experience.

    We are here because oil and commodity prices are plunging, China’s purchases are slowing, and GDP growth rates are in steep decline. Reflecting these trends, the IMF cut its 2016 projection for growth from 4.5 to 3.75 percent, concluding that the decade-long commodity cycle that had raised export revenues “seems to have come to an end.” With a population boom on the horizon, experts now worry about how Nigeria will produce enough jobs for its people.

    Without commensurate oil revenue, Nigeria’s flanks have now been laid bare. In November 2015, the Economist noted that “many African countries are de-industrialising while they are still poor, raising the worrying prospect that they will miss out on the chance to grow rich by shifting workers from farms to higher-paying factory jobs.” Nigeria’s import substitution industrialization (ISI) initiative that was expected to set the framework for the takeoff of most industries’ largely derailed because of lack of focus.

    But with the gains made in the cement sector, this appears to be our best bet for now. ISI is a trade and economic policy that advocates replacing foreign imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialised products.

    Nigeria has made several attempts at building a virile industrial base through import substitution. The concept depended on importing processed materials for assembling. The strategy bequeathed to the nation a number of assembly plants that were dependent on completely knocked down (CKD) components imported from industrialised nations. Volkswagen and Peugeot readily come to mind but soon fizzled out.

    The Obasanjo administration reawakened the initiative with the backward integration policy for the cement sector in 2002. The policy was designed to encourage local players to set up production plants with a view to making the nation self-reliant. Right now, local manufacturers of cement say they now have capacity that far exceeds demand.

    Dangote Group, which is the main driver of this revolution, changed the story when it ventured into local manufacture of cement, taking advantage of the enabling environment that the government had put in place to encourage local players. Dangote Cement Plc currently operates three cement plants located at Obajana, Kogi State, Gboko, Benue State and Ibese, Ogun State.

    It is quite possible that this can be replicated in other areas of the manufacturing sector. We can key into the Economic Commission for Africa (ECA) call for “smart protectionism,” suggesting that trade policy in Africa should be “highly selective,” with special treatment for certain sectors to advance national development goals.

    This is right thinking. For Nigeria, job creation will continue to remain elusive if we do not make concerted efforts to bring back the in ll over the world, nations are facing stresses from series of challenge – population growth, structural changes in the world economy, rural-urban migration, environmental degradation and rapid social change. One defining feature in all these is that societies with institutions, rules and norms for managing challenges and well established traditions of governance are generally better able to accommodate peacefully to change. Those with weaker governance, fragile social bonds and little consensus on values or traditions, on the other hand, are more likely to buckle.

    At the 43rd Annual General Meeting of the Manufacturers Association of Nigeria (MAN) last year, the association discussed “The Future of the Manufacturing Sector” as its theme. The association, before then, had been hammering on the precarious state of the sector for years. Industries were closing shop in droves because of the harsh operating environment and the dearth of critical infrastructure like power. The situation is even direr than it was last year.

    Dr. Thabo Mbeki, former President of South Africa was the guest speaker. The choice of Mbeki, according to MAN President, Dr. Frank S. Udemba Jacobs was because “of his antecedents and achievements as President of South Africa.” During Mbeki’s tenure, The South African economy grew at a yearly rate of 4.5%. Similarly, massive employment was created in the middle sector of the economy, leading to the creation of a large pool of middle class, especially with the implementation of Black Economic Empowerment, which led to a high demand for trained professionals. South Africa also attracted enormous foreign direct investment, making it the focal point of African growth.

    During his lecture, he pointed out that Africa loses at least $50 billion every year through trade mis-pricing which would make an important and positive contribution to the continent’s development efforts including industrialisation. Mbeki called for “national cooperation” in developing an “Industrial Revolution Plan…to defeat the scourge of illicit financial outflows.” He suggested that MAN and the rest of the corporate sector should take it as one of their tasks in the context of the industrialisation of Nigeria to join hands with the government and civil society to fight against illicit financial outflows.

    This “illicit financial outflow” is almost bringing the country to its knees because of the huge demands for billions of dollars to import goods, even goods we have capacity to produce. In times like these, we need our industries now more than ever.

    The United Nation (UN) predicts that by 2050 there will be 2.5 billion Africans – a quarter of the world’s population. Because of this and other predictions, Africa has remained the toast of investors who would not want to miss the opportunity of investing in an emerging market with such huge population. But things have started changing the way few predicted. The way things stand presently, four of Africa’s biggest economies are showing strains.

    Nigeria, South Africa, Angola and Kenya, the four leading economies, are seriously affected by the fall in oil and commodity prices. Nigeria relies on oil for 70% of government revenue and accounts for 90% of export revenue. That leaves very little room to adjust the country’s budget. From an economic point of view, that can only mean one thing – slower growth. As a result, growth prediction is fixed now at 2.3%, the lowest rate in 15 years, according to the IMF. We have drawn down on our currency reserves and implemented capital controls, making access to dollars very difficult. In an economy that relies on imports, the controls have made life difficult for citizens and companies.

    All these point to one thing: the country’s future is in the balance. Whether it bounces back from this commodity slump or slips back into financial impunity of the past will depend on whether our leaders have the will and determination of moving forward.

    For me, two things are crucial. The first is to recognise the new reality. Given the decline in our terms of trade, Nigeria’s buying power has gone down. We are not in this boat alone as other governments are being forced to adjust to this reality which is also affecting rich Gulf nations like Saudi Arabia, Qatar, Kuwait and others.

    The second is to focus on people, infrastructure and industrialisation. In recent years, the Economist and popular publications alike have argued that Nigeria, and indeed, Africa was on the threshold of an economic boom. Pointing to a decade of high growth and increased foreign investment, this argument held that the continent was finally on track to leave its long years of poverty and under-development behind. Some even said that Africa could become the next global economic powerhouse, following in the footsteps of East Asia.

    However, with this new reality, this position is now contentious for one obvious reason: weak or no industrial base. Nigeria’s growth would not be real, lasting, or beneficial until it is based on manufacturing rather than exporting raw commodities. Rather than focusing on the hype of mobile phones, we should ask critical questions and study some basic development indicators: Was manufacturing increasing as a percentage of GDP? Were the goods we exported becoming more valuable – finished products rather than raw materials?

    It is instructive to note that a 2011 U.N. report looked into these questions, and found that Nigeria and most African countries are either stagnating or moving backwards when it comes to industrialisation, quite unlike the East Asian experience.

    We are here because oil and commodity prices are plunging, China’s purchases are slowing, and GDP growth rates are in steep decline. Reflecting these trends, the IMF cut its 2016 projection for growth from 4.5 to 3.75 percent, concluding that the decade-long commodity cycle that had raised export revenues “seems to have come to an end.” With a population boom on the horizon, experts now worry about how Nigeria will produce enough jobs for its people.

    Without commensurate oil revenue, Nigeria’s flanks have now been laid bare. In November 2015, the Economist noted that “many African countries are de-industrialising while they are still poor, raising the worrying prospect that they will miss out on the chance to grow rich by shifting workers from farms to higher-paying factory jobs.” Nigeria’s import substitution industrialization (ISI) initiative that was expected to set the framework for the takeoff of most industries’ largely derailed because of lack of focus.

    But with the gains made in the cement sector, this appears to be our best bet for now. ISI is a trade and economic policy that advocates replacing foreign imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialised products.

    Nigeria has made several attempts at building a virile industrial base through import substitution. The concept depended on importing processed materials for assembling. The strategy bequeathed to the nation a number of assembly plants that were dependent on completely knocked down (CKD) components imported from industrialised nations. Volkswagen and Peugeot readily come to mind but soon fizzled out.

    The Obasanjo administration reawakened the initiative with the backward integration policy for the cement sector in 2002. The policy was designed to encourage local players to set up production plants with a view to making the nation self-reliant. Right now, local manufacturers of cement say they now have capacity that far exceeds demand.

    Dangote Group, which is the main driver of this revolution, changed the story when it ventured into local manufacture of cement, taking advantage of the enabling environment that the government had put in place to encourage local players. Dangote Cement Plc currently operates three cement plants located at Obajana, Kogi State, Gboko, Benue State and Ibese, Ogun State.

    It is quite possible that this can be replicated in other areas of the manufacturing sector. We can key into the Economic Commission for Africa (ECA) call for “smart protectionism,” suggesting that trade policy in Africa should be “highly selective,” with special treatment for certain sectors to advance national development goals.

    This is right thinking. For Nigeria, job creation will continue to remain elusive if we do not make concerted efforts to bring back the industries that defined Lagos, Aba, Port-Harcourt, Kano, Kaduna and other urban centres in the past.

     

  • InJoo mulls manufacturing plant in Nigeria

    A new mobile phone entrant into the market, InJoo is set to build a phone assembling and manufacturing factory in the country.

    It said this would help promote technology transfer and open a new vista of employment and other opportunities for youths, adding that with a huge population of energetic young men/women, the country remains strategic for its business.

    Its President, Jack InJoo, who spoke during the launch of the Injoo Max 3 phablet in Lagos, said the importance of the country to the firm’s business underscored the first global launch of the new device in the country.

    He said: “Setting up a factory in Nigeria also part of our plan because I believe in not only building after service centres but manufacturing and assembling plants. It is necessary as a mark of our commitment to the market and the people. By so doing, we will be complementing Federal Government’s efforts in job creation and support to the youths.

    “We want to continue to be alive in Nigeria, extend our reach to all parts of the country. I will be very happy if in the next five years, I can get 20 per cent of market share in smart phones in the country.”

    He said the firm has done well in Saudi Arabia, which is its main market, Egypt and the Gulf region where it has been able to garb four per cent of the market share in so short a time. “Nigeria is a strategic market to our business in Africa; that is why we have launched this product globally for the first time with Nigeria as the first place. My ambition is to get about five per cent within the shortest possible time,” he said.

    He said through the very strong partnership deals it the firm has signed with Yudala, Slot, Micro Station, and others,  products could be sourced easily both online and offline.

    “We have plans for all parts of Nigeria. We are just coming into the country. Getting to cover every nooks and crannies of the country will take time and thorough planning of the logistics,” he added.

    ‘’But for now, we are focusing on Lagos, Abuja, Kano, Port Harcourt and other major cities in the country, then, we can start spreading out,” he said.

  • Manufacturing: Lafarge, Access Bank partner to bridge gender gap

    Access Bank’s ‘W Initiative’, in collaboration with Lafarge Africa Plc, during the week organised a workshop with some of Nigeria’s leading women professionals in manufacturing to discuss gender disparity in the manufacturing sector.

    The workshop, which was attended by a large number of women executives and senior managers in the manufacturing sector, according to its organisers, demonstrated the conviction that women in manufacturing is good for business.

    Among others, the workshop examined the reasons for the unattractiveness of the sector to women, creating innovative solutions specifically targeted at professional women in manufacturing, and increasing the number of women who work in the manufacturing industry.

    Setting the tone for discussions, Access Bank’s Executive Director Elias Igbin-Akenzua said “approximately 600,000 manufacturing jobs are unfilled because companies can’t find qualified workers to fill them.

    “Women are critical to filling this gap and we must empower them to do so. We must also reduce the barriers for women in manufacturing in accessing funds from financial institutions for those who may want to transit from employees to manufacturing business owners”

    In her address to the gathering, Managing Director, Geocycle, Lafarge Africa Plc, Mrs. Adepeju Adebajo, remarked that women represent manufacturing’s largest pool of untapped talent and the dearth of women in manufacturing has been made more prominent recently, due to the potential skills shortage facing the industry.

    Mrs. Adebajo identified Nigeria’s formal education system as the most powerful agency of change from which several intelligent and confident women who now challenge many aspects of patriarchy in all leading occupations have emerged.

    While urging for support, coaching and encouragement for more women to be successfully recruited and retained in manufacturing, she stated that “women have become leading industry players in different sectors, which were for long the preserve of men – including manufacturing.

    “The industry needs to send out the right message that women can, and do succeed in manufacturing careers,” Adebajo said.

    Victoria Ibhawa of Deloitte provided valuable research and data, while other notable speakers at the workshop touched on the existing dearth of women professionals in the sector, the challenges they face and propositions on the way forward.

    This workshop is expected to culminate in the launching of a ‘think tank’ group providing advice and ideas on attracting, retaining and advancing women in the manufacturing workforce.

  • Manufacturing in a depressed economy

    Manufacturing in a depressed economy

    A robust manufacturing sector is fundamental to the diversification of the economy. But the sector, which is credited with the greatest capacity to create jobs, generate wealth and engender sustainable growth and revenue expansion, is at the crossroads. Fiscal and monetary policies and lack of infrastructure are taking a huge toll on manufacturing, with the fear that more companies may close shop, if steps are not urgently taken to stem the tide. Assistant Editor CHIKODI OKEREOCHA reports.

    Despite their resolve to survive, manufacturers face bleak prospects. The challenging fiscal and monetary policy environment and lack of supportive infrastructure have continued to put tremendous pressure on businesses, resulting in declining productivity and competitiveness.

    For instance, because of lack of infrastructure, particularly power, manufacturers spend an estimated N500 billion yearly to run and maintain their power plants, according to the Chairman, Economic Policy Committee (EPC) of Manufacturers Association of Nigeria (MAN), Reginald Ike Odiah, an engineer.

    Odiah, who is Managing Director/Chief Executive Officer, Bennett Industries Limited, said the huge cost of providing alternative electricity is responsible for high production cost. He said it is also responsible for the low contribution by the real sector, especially manufacturing to the Gross Domestic Product (GDP).

    For instance, while Nigeria’s real sector contribution to GDP stands at 9.5 per cent, those of United States of America (US) and China stand at 35.6 per cent and 49.5 per cent. “Manufacturing cost in Nigeria is twice that of Ghana, four times that of South Africa and Europe, and nine times that of China and Malaysia,” the industrialist said.

    Odiah, who spoke at a forum organised by MAN in Lagos, also said the high cost of production is also the reason local and foreign investors lost interest in investing in the country, closure of factories and migration of the few surviving ones to greener pastures. He said this has resulted in job losses, with attendant insecurity and rising crimes.

    Also, because of rising energy cost, most manufacturing firms in Nigeria are contending with falling profit margin, which remains a major threat to business sustainability and global competitiveness.

    The President of MAN, Dr. Frank Jacobs, lamented that manufacturers are paying for electricity not consumed.

    “In spite of the poor energy situation in the country, NERC has maintained increased electricity charges not considering its implication on the economy, especially the productive sector,” Jacobs said, adding that in spite of the high tariff from the Nigeria Electricity Regulatory Commission (NERC), manufacturers spend much on alternative energy sources for production.

    The implication of this development, he said, was increase in the average cost of production in the sector, which lowers the competitiveness of locally produced goods against imported close substitutes. He urged the new government to streamline electricity tariff to reflect the actual consumption by the industries instead of the current use of estimated bills.

    While the nation’s infrastructure deficiency, particularly electricity supply, continues to hurt manufacturers, sometimes forcing some of them to close shop, the prevailing macro-economic indicators also point to a sector irretrievably headed for collapse if nothing is done to stem the tide.

    For instance, inflation rate is hovering around 20 per cent. Cost of funds is high, as much as 20 per cent, while the exchange rate remains unstable.Unemployment is worsening and economic growth rate is declining. And the crippling effects of these negative indicators have pushed not a few manufacturers to the panic mode.

    “Cost of funding is a big issue. For most of them or generally in the economy, cost of funding is well over 20 per cent. And for the real sector operators, it is difficult to sustain a business at that level with that kind of corporate funding, especially when you realise again that you are facing competition from products that are coming from Asia that are very cheap,” says Director-General of Lagos Chambers of Commerce and Industry (LCCI), Mr. Muda Yusuf.

    He blamed this for the high mortality rate of manufacturing firms especially at the medium and the small scale level. According to him, it is also responsible for why return on manufacturers’ investment is slow, while the turn-around is fewer.

    An economist and industrialist Mr. Henry Boyo painted a disturbing picture of the manufacturing sector caused by the crippling effects of the nation’s fiscal and monetary policy framework. He warned: “Manufacturers are at the crossroads, where we may lose some of our members. We may lose 50 per cent of our members, if nothing is done fast to address the current monetary policy framework.”

    While pointing out, for instance, that low rate of inflation, low cost of funds, reasonable exchange rate, and adequate power supply are four critical variables necessary for manufacturers’ survival, Boyo was emphasised that “inflation, which is  hovering around 20 per cent, high cost of power and an exchange rate that is unreasonably unstable is hurting manufacturers”.

    He was guest speaker at the “Business Luncheon for Managing Directors/CEOs” organised by the Ikeja branch of MAN in Lagos, last week. This year’s edition theme: “Manufacturing in a depressed economy. The way forward,” x-rayed the challenges facing manufacturers, particularly under the Foreign Exchange (forex) crisis and proffer solutions.

    At the event, Boyo predicted that without a robust monetary policy to address the challenge of excess liquidity in the system, which is the main driver of the afore-mentioned four critical variables, the naira may fall to N500 to a dollar before the end of the year.

    He explained that the unstable exchange rate, hike in interest rates, and inflationary pressure are a direct outcome of excess liquidity in the system and that the best way to address the problem is to liberalise the dollar.

    Boyo said companies and government agencies whose earnings are in dollar should be issued with dollar certificates with which to approach banks.

    He also wants their dollar earnings exchanged by banks at prevailing rate or at market determined rate, instead of the CBN hijacking the dollar earnings and printing naira equivalent, an approach he said constantly results in liquidity buildup.

    “When this is done, the problem of excess liquidity would have been addressed to warrant decline in inflation rate. With inflation rate trending low, interest rate will fall sustainably. And external reserves could be conserved and built up sustainably. There will be no need for devaluation of the naira,” Boyo explained.

    The industrialist insisted that the crisis of excess liquidity has done incalculable damage to the economy, because there is a strong nexus between the crisis of liquidity, rising inflation, exchange rate depreciation, weakening purchasing power and worsening poverty. He said CBN must stop its obnoxious payment policy if manufacturers must breathe a sigh of relief.

    Also lamenting the negative impacts of CBN’s monetary policies on the manufacturing sector, Jacobs said the sector performed abysmally low in the second quarter of last year in terms of output and contribution to the GDP.

    Citing figures from the National Bureau of Statistics (NBS), for instance, he said manufacturing real output grew by 3.82 per cent in the second quarter of last year, from 14.01 per cent of the corresponding period of 2014. This, according to him, indicates a 17.83 percentage point decline over the period.

    Also, the manufacturing sector’s contribution to nominal GDP in the second quarter of last year fell to 9.29 per cent as against 9.77 per cent of the corresponding period of 2014; indicating 0.48 percentage point decline over the period. He lamented that all manufacturing indices have crashed, as capacity utilisation, production value and manufacturing investment have been declining.

    Similarly, the Chairman, MAN, Apapa branch, Mr. Babatunde Odunayo, lamented that manufacturers were merely surviving following the implementation of certain fiscal and monetary policies.

    “The sector is struggling to survive the very difficult monetary policy regime. Some manufacturing outfits have shut their operations; others are waiting for favourable policies to come up,” he said, at a seminar organised by the branch in Lagos, last week.

    Before the June 15, 2016 flexible, market-driven Foreign Exchange (forex) regime announced by the CBN, more than 200 out of the over 2,000 manufacturing firms in the country were on the verge of closing shop due to the lack of raw materials to continue production, according to Jacobs.

    While about 100 operators in the general goods sector indicated readiness to close shop when they run out of raw materials, 120 operators in the pharmaceutical manufacturing sector were said to be down to two months’ supply of raw materials after which they may be unable to restock. Also, in the food and beverage sector, only few of the 80 operators remained in business.

    In June, last year, CBN’s monetary policy that barred importers of 41 items that can be sourced locally from having access to its official forex window threw manufacturers into confusion. Those who needed the raw materials and products restricted from the forex market as their primary products in the manufacturing process were adversely affected.

    This was, perhaps, why most real sector operators, especially manufacturers, perceived the new market-driven forex regime as a welcome development. Their hope was that the policy will drive down the exchange rate of the naira to the dollar, spur economic growth and development, and encourage more Diaspora remittances, among others.

    For instance, the National President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Chief Bassey Edem, described the new forex regime as “a welcome development,” saying that it will further drive down the exchange rate of the naira to the dollar. It will also open the floodgate for influx of remittances by Nigerians abroad that have lots of dollars

    He, however, told The Nation that consistency is key to the success of the policy. He however said at a meeting CBN had with members of the Organised Private Sector (OPS).

    The CBN Governor Godwin Emefiele promised operators that the policy would not be dropped midway or reversed. He also said the CBN at the meeting informed the OPS that it would not back down on the import prohibition list unless OPS members show proof that any of the items on the list cannot be produced locally.

    In removing the 41 items from access to its forex window, CBN’s good intention was not in doubt. For one, the apex bank believes that those items could easily be produced in Nigeria rather than spend the country’s reserves on importing them. The CBN also said the policy was aimed at encouraging local production of the items.

    Because of the import-dependence of the economy, the slide in oil prices in the international market, which started mid-2014, caused an unprecedented slide in the value of the naira, a development that necessitated the need for a policy intervention to defend the value of the naira and protect the nation’s foreign reserves in the midst of dwindling revenue from oil.

    The CBN always uses the foreign reserves to defend the naira, but the reserves have been badly depleted as a result of sharp fall in oil revenue. Industry watchers say CBN policy of defending the naira is failing, and there is need for the apex bank to allow the naira rate to be determined by market forces, which was what the apex bank did by coming out with  the new forex policy.

    However, while many manufacturers have hailed the policy, it remains to be seen how the government intends to address other institutional and infrastructure challenges holding the manufacturing sector down.

  • Kia cuts environmental impact of car manufacturing

    Kia cuts environmental impact of car manufacturing

    Kia Motors Corporation has made significant progress in reducing the environmental impact of its production facilities, according to the company’s annual ‘MOVE’ sustainability report.

    The Korean car manufacturer’s ongoing efforts to introduce more environmentally sustainable production methods have, over the past one year, resulted in lower greenhouse gas emissions levels, less waste and reduced water use across its domestic production sites. These have been achieved with a strong focus on recycling, employee sustainability initiatives, reducing unit waste and cleaner, more modern production methods.

    Kia’s domestic plants, located in Sohari, Gwangju and Hwasung, Korea, accounted for 56.5 per cent of all Kia global production in 2015 – 1.72 million units. While the company’s year-on-year global sales grew by 0.3 per cent in 2015, to 3.05 million units, the ongoing focus on sustainability across the brand’s manufacturing facilities has minimised the environmental impact of this growth.

    Kia’s focus on improving production methods has resulted in a 12.4 per cent per-unit reduction in the volume of raw materials required since 2014 and a 21.5 per cent reduction since 2003. This includes a 22.1 per cent drop in the amount of steel needed to produce each individual car, as well as an 11.7 per cent drop in the consumption of paint throughout the same period since 2003.

    As a result of this push for greater efficiency, Kia has recorded a 1.2 per cent reduction in per-unit waste output since 2014 – and a 30 per cent decrease since 2003. In 2015, the three domestic production sites generated a total of 233,442 tons of waste, down 0.2 per cent from the previous year despite the growth in production. Meanwhile, recycling rates have risen, with the company finding alternative uses for 93.7 per cent (219,000 tons) of all waste materials. For instance, unused zinc-coated steel is sent to steelmakers in Korea, while uncoated steel can be recycled for use at the foundry in Kia’s Gwangju facility. Kia has also introduced programs to recycle and re-use paint and thinners, while other waste is being used to make cement for construction, as well as other materials.

    Waste materials that can’t be reused or recycled are incinerated or buried, with landfill waste totalling near 1 per cent of all factory waste. The Sohari manufacturing facility, with a production capacity of 340,000 cars per year, has generated 0 per cent landfill waste since 2008.

  • Manufacturing loses over N300b to forex policy

    Manufacturing loses over N300b to forex policy

    Manufacturers Association of Nigeria (MAN) Vice President Mrs. Stella Okoli has said the sector lost over N300 billion to the distress in the economy, accentuated by the foreign exchange (forex) policy of the Central Bank of Nigeria (CBN).

    Mrs Okoli, who explained that though she was not privy to the method used in computing the loss, a critical look at the sector would reveal that more than N300 billion had actually been lost.

    Her position is based on the forex rate when compared to what it was about seven months ago.

    “When you really look at it, you will find out that more than the N300 billion has been lost because we (manufacturers) bought foreign exchange (forex) last year between N170 and N200, but now technically, we are buying it for N350. This is because with the new forex policy, manufacturers have to wait for a certain period of time to be able to get forex allocation from government,” Mrs Okoli said. The earliest allocation of forex to some manufacturers would mature by July 22, whereas some of the commitments made to their suppliers have not yet been redeemed, she said.

    Shedding more light on manufacturers’woes, Mrs. Okoli, who is also the Chief Executive Officer, Emzor Pharmaceuticals, explained that those that placed orders for raw materials at the old exchange rate and hadn’t paid for them because they didn’t have access to forex at the time, are now worse off as they must redeem the payment and commitment to their suppliers at a higher cost now given the current rate.

    “So, we have lost and people have scaled down operation; while some others have closed shop. We lost through forex; interest rate and manpower and though it causes us so much to produce, but we can’t pass on the extra cost to consumers because they will complain,” she said.

    But irrespective of this development, Okoli says there is a very bright future for the sector. Her conviction is derived on the belief that the government is not going to neglect the manufacturing industry.

    “The government had made it clear that they are going to support manufacturing and we will believe them, it’s just that maybe they need more time, but we cannot get worse than we are now. So, the future is very bright because without manufacturing we are dead,” Okoli added.

  • Manufacturing in a depressed economy

    Manufacturing in a depressed economy

    A robust manufacturing sector is fundamental to the diversification of the economy. But the sector, which is credited with the greatest capacity to create jobs, generate wealth and engender sustainable growth and revenue expansion, is at the crossroads. The fiscal and monetary policies and lack of infrastructure are taking a huge toll on manufacturing, with the fear that more companies may close shop, if steps are not taken to stem the tide. Assistant Editor CHIKODI OKEREOCHA reports.

    Despite their resolve and will to survive, manufacturers face bleak prospects. The challenging fiscal and monetary policy environment and lack of supportive infrastructure have continued to put tremendous pressure on businesses, resulting in declining productivity and competitiveness.

    For instance, because of lack of infrastructure, particularly power, manufacturers spend an estimated N500 billion yearly to run and maintain their power plants, according to the Chairman, Economic Policy Committee (EPC) of the Manufacturers Association of Nigeria (MAN), Reginald Ike Odiah, an engineer.

    Odiah, who is Managing Director/Chief Executive Officer, Bennett Industries Limited, said the huge cost of providing alternative electricity is responsible for high production cost. He said it is also responsible for the low contribution by the real sector, especially manufacturing to the Gross Domestic Product (GDP).

    For instance, while Nigeria’s real sector contribution to GDP stands at 9.5 per cent, those of the United States of America (US) and China stand at 35.6 per cent and 49.5 per cent. “Manufacturing cost in Nigeria is twice that of Ghana, four times that of South Africa and Europe, and nine times that of China and Malaysia,” the industrialist said.

    Odiah, who spoke at a forum organised by MAN in Lagos, also said the high cost of production is  the reason local and foreign investors lost interest in investing in the country, closure of factories and migration of the few surviving ones to greener pastures. He said this has resulted in job losses, with attendant insecurity and rising crimes.

    Also, because of rising energy cost, most manufacturing firms in Nigeria are contending with falling profit margin, which remains a major threat to business sustainability and global competitiveness.

    The President of MAN, Dr. Frank Jacobs, lamented that manufacturers are paying for electricity not consumed.

    “In spite of the poor energy situation in the country, NERC has maintained increased electricity charges not considering its implication on the economy, especially the productive sector,” Jacobs said, adding that in spite of the high tariff from the Nigeria Electricity Regulatory Commission (NERC), manufacturers spend much on alternative energy sources for production.

    The implication of this development, he said, was increase in the average cost of production in the sector, which lowers the competitiveness of locally produced goods against imported close substitutes. He urged the new government to streamline electricity tariff to reflect the actual consumption by the industries instead of the current use of estimated bills.

    While the nation’s infrastructure deficiency, particularly electricity supply, continues to hurt manufacturers, sometimes forcing some of them to close shop, the prevailing macro-economic indicators also point to a sector irretrievably headed for collapse if nothing is done to stem the tide.

    For instance, inflation rate is hovering around 20 per cent. Cost of funds is high, as much as 20 per cent, while the exchange rate remains unstable.Unemployment is worsening and economic growth rate is declining. And the crippling effects of these negative indicators have pushed not a few manufacturers into panic mode.

    “Cost of funding is a big issue. For most of them or generally in the economy, cost of funding is well over 20 per cent. And for the real sector operators, it is difficult to sustain a business at that level with that kind of corporate funding, especially when you realise again that you are facing competition from products that are coming from Asia that are very cheap,” says Director-General of Lagos Chambers of Commerce and Industry (LCCI), Mr. Muda Yusuf.

    He blamed this for the high mortality rate of manufacturing firms especially at the medium and the small scale level. According to him, it is also responsible for why return on manufacturers’ investment is slow, while the turn-around is fewer.

    An economist and industrialist Mr. Henry Boyo painted a disturbing picture of the manufacturing sector caused by the crippling effects of the nation’s fiscal and monetary policy framework. He warned: “Manufacturers are at the crossroads, where we may lose some of our members. We may lose 50 per cent of our members, if nothing is done fast to address the current monetary policy framework.”

    While pointing out, for instance, that low rate of inflation, low cost of funds, reasonable exchange rate, and adequate power supply are four critical variables necessary for manufacturers’ survival, Boyo was emphasised that “inflation, which is  hovering around 20 per cent, high cost of power and an exchange rate that is unreasonably unstable is hurting manufacturers”.

    He was guest speaker at the “Business Luncheon for Managing Directors/CEOs” organised by the Ikeja branch of MAN in Lagos, last week. This year’s edition theme: “Manufacturing in a depressed economy. The way forward,” x-rayed the challenges facing manufacturers, particularly under the Foreign Exchange (forex) crisis and proffer solutions.

    At the event, Boyo predicted that without a robust monetary policy to address the challenge of excess liquidity in the system, which is the main driver of the afore-mentioned four critical variables, the naira may fall to N500 to a dollar before the end of the year.

    He explained that the unstable exchange rate, hike in interest rates, and inflationary pressure are a direct outcome of excess liquidity in the system and that the best way to address the problem is to liberalise the dollar.

    Boyo said companies and government agencies whose earnings are in dollar should be issued with dollar certificates with which to approach banks.

    He also wants their dollar earnings exchanged by banks at prevailing rate or at market determined rate, instead of the CBN hijacking the dollar earnings and printing naira equivalent, an approach he said constantly results in liquidity buildup.

  • Ooni calls for ‘house manufacturing’

    How can the housing gap be addressed? It is by manu-facturing rather than building houses, says the Ooni of Ife, Oba Adeyeye Enitan Ogunnusi, Ojaja II.

    The Ooni was speaking at the launch of the second edition of “The state of Lagos Housing Market Report 2016’ compiled by Roland Igbinobia Real Foundation for Housing and Urban Development (RIRFHUD).

    Calling for the compilation of an information bank in the real estate sector, he said such data would make a positive impact on the industry, and help in turning around some strategic slums in Lagos and other states.

    “We need to all come together if we are going to work towards manufacturing homes because in Nigeria, we haven’t started manufacturing homes. What we are doing is building homes. The day we start to manufacture homes in this country, then we are serious,” he said.

    To achieve this, the Ooni, with vast interest in real estate, said there is a need for all corporate organisations, both in the financial services sector and the mortgage arm of the real estate, to invest in the sector. This, he noted, will position the industry players to be able to influence a lot of government policies in the overall interest of the sector.

    Chairman of the Foundation, Mr. Newton Jibunoh, noted that the publication of the book has given support to a fledgling sector of the economy. He explained that the need for shelter is as dynamic and universal as it gets recurring for as long as the people strive and regenerate.

    “By the year 2050, it is projected that Nigeria’s population will come to about 398million with urban population rising to 74.1 per cent. This projection emphasises one cardinal fact- shelter will continue to be in demand and Nigeria’s housing need challenges will prove to be a continual problem if not strategically addressed,” he said.

    While recommending the use of the report to industry stakeholders and other players, he pointed out that the report will fill the curious mind’s quest for knowledge and recruit measures that will see players in the sector reap dividends for their investment.

  • Epina to train youths on ceramic manufacturing

    Epina Technologies Limited is to organise a training to hone the entrepreneurial skills of youths in the ceramics value chain.

    Its Chief Executive Officer, Professor Patrick Oaikhinan, said the training, which holds from May 16 to 18, at the Federal Institute of Industrial Research Oshodi, (FIIRO), would reduce unemployment.

    He told The Nation that the training would expose participants to the rudiments of ceramics production. He said at the end of the training, youths would also be able to set up their own businesses along the ceramics value chain.

    Oaikhinan, who noted that ceramics is a sector that has been under-exploited in the country, said it became necessary to organise such training in order to develop the sector to its full potential by developing local production in order to stop ceramic importation into the country.

    He expressed regrets that despite its wider application, ceramics seemed to get little attention of investors in the country due to lack of required skills for its production.

    He explained that the would-be entrepreneurs need little capital and small space to start production, adding that there are varieties of things they could produce at the back of their houses including jewelries and home utensils.

    Oaikhinan said the use of ceramic materials across a variety of applications has grown exponentially in recent years. According to him, these include transportation, communication, energy and manufacturing.

    In order to meet the growing production capacity required across disparate applications, the industry, he said, must drive innovation in manufacturing and nurture a skilled and knowledgeable workforce.

    The CEO of Epina Technologies said the firm is offering unique three days practical training in ceramics – a virtual programme bringing together all the resources from industry and education to provide expert advice and training to help attendees on their way to an exciting career.

    “Our trainers share their specialist knowledge and resources on raw materials processing to ensure that essential knowledge and skills are passed to future generations, enabling them to make significant contributions towards an ever more vibrant and forward-thinking industry,” he said.