Energy crisis tops industrial constraints in 2009
30 Dec 2009
Author: Babatola Adeyemi and Roseline Okere
Country: Nigeria
SADLY again, as it used to be for over a decade now, it is the same old story: Nigeria has refused to ensure an enabling environment to boost industrial activities.
Hence, the country remained-pitiably and embarrassingly so - a trading nation.
Even at that, she is not enjoying the best in trading, as the country remained a dumping ground for fake and substandard products, despite commendable efforts by the Standard Organisation of Nigeria (SON) to tackle that.
Of the myriad of problems confronting the industrial sector, the major one, according to sector operators, is the lingering energy crisis, especially the poor power supply situation.
Despite series of conferences and assurances, the problem remained monstrous. Indeed,President Umaru Yar'Adua's reputation and integrity suffered in the circumstance, as his promised declaration of a state of emergency in the power sector and his pledge to ensure the generation of 6,000 megawatts of power before the end of this year remained unfulfilled.
Again therefore, local manufacturers have to keep looking into the future for the much-desired industrial revival in the country, which remained predicated on good infrastructure.
In an assessment of the industrial sector in 2009, the President, Manufacturers Association of Nigeria (MAN), Alhaji Bashir Borodo stated: "The year was very tough, and this was occasioned essentially by energy problem, namely fuel pricing, black oil, gas supply and pricing problem".
Borodo however admitted:" We can also say that there was a marginal improvement in power supply".
Still on a positive note, the MAN chief believed that the 'Amnesty initiative' had started working and hoped it would be sustained "because a lot depends on it".
He insisted:" Power supply and sustaining of the amnesty are linked, because the power plants depend on gas and militancy in the Niger-Delta would affect gas supply. We hope 2010 will be better. We are hopeful".
To the Paints Manufacturers Association of Nigeria, the year 2009 was a very challenging and difficult one for the entire manufacturing sector.
The Chairman, Mr. Bola Olayinka stated: "The problem of power and energy was the number one problem that continued to agitate the minds of Nigerians and the productive sector throughout the year, as the poor supply of electricity continued with no solution in sight.
"The challenge posed by infrastructural deficiencies of roads and public utilities is still very much around. The operating costs of paints manufacturers increased by over 40 per cent on account of the skyrocketing increases in the cost of generating own electricity, transport and haulage costs among others".
He added that despite assurances from the apex bank that the effects of the global financial crisis would not be felt by businesses in Nigeria immediately, "by the end of the year they came to the reality that they had been caught by the crisis".
Olayinka stated further that the use of tax consultants and touts by some governments to collect various taxes increased during the year.
He also noted that the security situation in the country worsened in the last one year, as could be seen in the increased number of kidnapping, hostage-takings, armed robberies, extra-judiciary/ritual killings and assassinations.
Olayinka, who is also the managing director of DN Meyer Paints Plc, added that the problem of low tariffs on imported finished paints impacted negatively on the operations of paints manufacturers as all sorts of low quality paints were allowed into the country.
He lamented: "Our members' market shares and return on investment have been eroded by the uncontrolled level of product adulteration, faking and merchandising of paints. It is however, hoped that the introduction of Mandatory Conformity Assessment Programme (MANCAP) by Standards Organisation of Nigeria (SON) will assist in reducing the menace when it commences enforcement in the paints industry.
Corroborating Olayinka, Chairman of Kano branch of the Manufacturers Association of Nigeria, Alhaji Sani Umar said that the unfavourable business atmosphere, occasioned by dilapidated infrastructure, erratic power supply, multiple taxation, among other difficulties in the country, "forced many manufacturing industries to relocate to neighbouring countries during the year".
He said available data showed a downward trend in the manufacturing sector, especially in the last few years.
Recounting some of the reasons that led some industrialists to seek refuge in foreign lands, Umar said, "Apart from daunting infrastructural challenges, which have impeded the growth of the manufacturing sector, there were also perennial challenges of corruption, politicisation and misplacement of allocation or priorities when it comes to allocation of resources in Nigeria."
Umar explained that manufacturers face "the challenge of high cost of production as a result of high cost of credit facilities, forex, inflation, inadequacies of infrastructures, low demand for locally manufactured goods and unchecked influx of foreign goods.
"Others include increase in the cost of black oil (LPFO) and diesel (AGO) which was formerly sold at N25.20 and N30.00 per litre and was increased to N72 and N93 per litre, representing an increase of over 150 per cent and 200 per cent respectively.
The MAN chief also decried multiple taxation, especially at local government level, which continued to hamper the existing industries and discouraged establishment of new ones and the attraction of Foreign Direct Investment.
He said the establishment of various credit and development institutions by government and private sector has not provided the much-needed access to fund to small and medium enterprises.
Umar disclosed that because of the bad business climate, "the problem of manufacturing sector was more or less promoting imports at the expense of local manufacturers during the year".
Also speaking on the challenges encountered by manufacturing during the year, the Chairman of Multi-Trex Investment Plc, Chief Bayo Akinnola said that the company, which was wholly powered by diesel generators, had to bear the huge cost of petroleum products, most especially diesel.
He added that the "punitive cost of borrowing in the domestic economy further compounded an already intolerable situation".
The Chairman of Dangote Group, Alhaji Aliko Dangote also said that the global financial meltdown imposed challenges on the business environment.
This, he said, was through reduced access to both local and foreign finance, reduced purchasing power in the economy and sustained high price of wheat, which he said, remained the company's major raw material.
Nevertheless, the year also witnessed some positive developments, even at the international level.
For instance, the International Textile Conference organised by Banquaires facilities- a private firm- which brought stakeholders together, renewed efforts at reviving the comatose textile sector.
Perhaps the recent release of N10 billion to the Bank of Industry by the federal government was part of the impact of the conference.
Also, the relaunch of the 'Buy-Made-in-Nigeria campaign' by the Federal Ministry of Commerce and industry(FMI), notwithstanding prevailing challenges, was seen by some as a necessary measure to encourage the few operators that are still producing, stimulate improvement in local products' quality, even as it also afforded another opportunity to showcase the country's investment potentials.
There were also cases of increased investments, as done by Multi-Trex limited- a cocoa processing firm, Lafarge Wapco plc, Flour mills Nigeria Limited and a host of others.
And the launch of new products by many operators continued despite prevailing challenges.
And on the International scene, FMI has announced Nigeria's preparedness to use next year's Shanghai Expo in China to boost the country's industrialization agenda.
Also, stakeholders have continued to canvass improved business environment for the country as witnessed in various fora, like Economic Partnership Agreement(EPA) meetings and the recent Federation of West African Chambers of Commerce and industry(FEWACCI) forum in Ghana, among others.
One hopes, like Borodo said, that next year would be better.
Indeed, if the promised 6,000 megawatt target could be achieved by the first quarter of 2010, what a great relief that would be, and what hope it would rekindle for a prosperous year for the industrial sector in 2010.
