A large number of manufacturing firms are shaky today as federal and state governments continue to pay little attention to age-old problems facing manufacturers.
In 2014, Procter&Gamble set up a $300million diaper line in Agbara, Ogun State, which was tapped as the biggest US non-oil investment in Nigeria.
Four years down the line, the company has packed up, citing restructuring as its main reason. But those familiar with the company told BusinessDay that the company had to shut down its Agbara plant due to high production cost incurred at the plant.
Poor road network and multiplicity of taxes are two age—old problems that are hurting manufacturers in Ogun State today, where P&G operated. Roads along Agbara/Igbesa axis are bad and the government has refused to build them, despite collecting billions in taxes from manufacturers.
Obi Ezeude, CEO of Beloxxi’s Industries, complained on February 8 this year, during a factory commissioning, that the poor state of roads in Agbara was hurting manufacturers, as vehicles and company trucks often get stuck in the mud. Government has ironically asked the manufacturers to bear 40 percent of the cost of fixing the road, while it shoulders the rest.
Power sector expenditure in the manufacturing sector has been on the rise since 2014 and 2015. Manufacturers spent N51.35 billion on alternative energy sources in the second quarter (Q2) of 2017; N66.03 billion in the first quarter (Q2) of 2017; N62.96 billion in H1 of 2016, and N69.99 billion in H2 of 2016, according to the Manufacturers Association of Nigeria (MAN).
Average daily electricity supply in H1 of 2017 declined to five hours, from seven hours supplied in the corresponding period of 2016 and eight hours in the H2 of 2016. There was, however, a nine-hour average power supply in the second half of 2017.
“It is no more news that manufacturers in Nigeria currently self-generate as much as 13,000MW through alternative sources of energy, in order to stay afloat. In fact, cost of alternative electricity generation alone constitutes about 40 percent of our production cost. With such high costs, made-in-Nigeria products will hardly be competitive,” Frank Jacobs, immediate past president of MAN, said at a special interactive forum on Eligible Customer Regulation of the Nigeria Electricity Regulatory Commission (NERC) in June 2018.
Manufacturers have given up on power distribution companies (DisCos), prompting them to form a corporation known as MAN Power Development Company to cater to their energy needs.
More so, rather than reduce, the number of taxes payable by manufacturers across the country has come to 54 as against 37 in 2014. Multiple taxation has sacked firms such as Matna Starch from Ondo State and continues to threaten others in various states.
Furthermore, policy inconsistency still remains a big issue. After promising exporters heaven on earth, the immediate past government suspended the Export Expansion Grant mid-way. RN Global and many other firms in the Kano/Kaduna axis fell to the sledgehammer of this policy somersault.
A survey conducted by MAN shows that the average interest rate banks charged manufacturers in the second half (H2) of 2017 was 23.05 percent, as against 22.65 percent in first half (H1) of 2017 and 21.4 percent in H1 of 2016.
Again, the Ajaokuta Steel Complex is yet to be privatised or revived many years after, prompting manufacturers to seek steel inputs from abroad. If the complex were in operation, it would provide a big source of raw materials for steel makers and other manufacturers.
“Currently, I am not sure those technologies at Ajaokuta are competitive in steel making. The world has moved on. What is required now is for the private sector to get more and more involved in the downstream and the upstream segments in the steel business,” Raj Gupta, chairman, African Industries Group, a consortium of 12 companies, including six steel plants, told BusinessDay recently.
