By Babatope Babalobi
Hundreds of Nigerian manufacturing companies have folded up over the years, the surviving ones are grasping for breath, and some planning to relocate to Ghana, a country recently described as ‘the new world’s factory’ by Deutsche Welle, a German media firm.
A World Bank Enterprise survey reported 322 private firms closed down in Nigeria between 2009 and 2014 due to stifling business regulations, corruption, and political environment. The Director of Economic and Statistics Department, for Manufacturers’ Association of Nigeria, Oluwasegun Osidipe, was once quoted as saying 196 manufacturing companies shut down their operations between 2015 and 2017 due to the biting recession.
There is a very long list of manufacturing companies and factories that have folded up in Nigeria, space will not permit naming all. The short list include Berec Batteries; Exide Batteries; Okin Biscuits; Osogbo Steel Rolling Mills; Nigeria Sugar Company; Bacita; Tate and Lyle Sugar Company; Matches Manufacturing Company, Ilorin; Nigeria Paper Mill Limited located in Jebba, Kwara State; Nigerian Newsprint Manufacturing Company Limited, Oku-Iboku, Akwa Ibom State; and the Nigerian National Paper Manufacturing Company Limited in Ogun State.
Others include Nigeria’s six automobile assembly plants, namely Peugeot Automobile Nigeria Limited, Kaduna, set up in 1975; Volkswagen of Nigeria Limited, Lagos, established in 1978; Anambra Motor Manufacturing Limited, Emene, Enugu, set up in 1980; Steyr Nigeria Limited Bauchi; National Truck Manufacturers, Kano; Fiat Production; and LeyLand Nigeria Limited Ibadan.
The most troubled industrial sector perhaps is Nigeria’s textile industry. A liberalisation policy that opened Nigerian borders to cheaper textiles from China, coupled with smuggling of foreign textiles killed the once vibrant and thriving textile industry.
Thirty eight major textile companies closed down business in Nigeria between 1999 and 2009, according to the Nigerian Textile Manufacturers’ Association. These firms include Afprint Nigeria Plc; President Industries Nigeria Ltd; Aswani Industries Nigeria Limited; and Nigerian Systhetic Fabrics Limited; and First Spinner Pls all in Lagos State. Others are United Nigeria Textile Limited; Arewa Textiles; Kaduna Textile Limited; Unitex Limited; Supertex Limited all in Kaduna State; Kano Textile Printers Limited; Asaba Textiles Mills; Aba Textile Mills Limited, Aba; Edo Textiles Mills Limited Benin, and Odua Textile Industries Limited, Ado Ekiti.
Kano, the most populous city in the North, once the hub of the textile industry, has lost the commercial glory. In 2018, the Kano branch of the MAN reported that 232 manufacturing plants out of the 338 existing in Sharada/Challawa and Bompai Industrial estates, in Kano City closed down between 1994 and 2018. Of course, this has several implications as factory workers are pushed to the streets becoming social miscreants.
The unease of doing business in Nigeria is not limited to the textile industry. The cocoa industry, once Nigeria’s major foreign income earner, whose pride is symbolised by the imposing 25- storey building Cocoa House in Ibadan, is prostrate and in dire straits. Nigeria’s once buoyant 27 cocoa processing factories have reduced to only five, all such as Cocoa Products (Ile Oluji) Limited are operating at very low capacity.
Unfortunately, newly established factories are also reeling in business misfortunes. In March 2019, GlaxoSmitheKline Consumer Nigeria Plc announced plans to shut down its production facility in Agbara by the third quarter of 2021, and hand over production of its consumer health products, medicines, and vaccines to local contract manufacturers.
Similarly, when P&G, manufacturers of the popular ‘Always’ and Pampers brands of sanitary pads and diapers, inaugurated a $300m production plant in Agbara Industrial Estate, Ogun State, in 2017, it was described as the largest single investment by a non-oil firm in Nigeria. A year later, the company announced plans to shut down the $300 plant due to high cost of importing raw materials and unfriendly government regulations and policies. The company has also divested from Vicks lemon plus plant in the Oluyole Estate, Ibadan, Oyo State.
About four years ago, exactly June 30, 2016, the United Airlines suspended its daily flight from Lagos to Houston-Texas, and Spanish carrier, Iberia, on May 12, 2016, also ended its flights to Nigeria from Madrid due to foreign exchange policy and difficulty in repatriating profits.
Nigeria’s misfortunes have turned to Ghana’s gain thanks to the Economic Commission of West African States’ free trade treaty. Some local business have relocated to Ghana, a neighbouring country that enjoys a stable electricity and offers a more business friendly environment. In 2006, two of Nigeria’s leading tyre manufacturers, Michelin and Dunlop, relocated their factories to Ghana citing epileptic energy supply in Nigeria as the chief reason.
Ghana is replacing Nigeria as West Africa’s aviation hub as major international airlines which used to have their regional operational headquarters in Lagos have moved to Accra, Ghana. These airlines refuel and route their journey in Ghana after picking passengers in Nigeria. Reasons for their relocation are high cost and scarcity of aviation fuel, poor navigational and landing aids, scarcity, high cost and epileptic supply of JetA1 aviation fuel; obsolete infrastructure and poor value of the naira. Recently, some Nigeria bound flights were diverted to Ghana, causing a national embarrassment.
There are speculations that multinationals such as Cadbury Nigeria Plc, Paterson Zochonis (PZ) and Unilever as well as Guinness Plc are considering the feasibility and viability of moving their factories to Ghana, a country fast overtaking Nigeria as West Africa’s leading business hub. A close relation who recently visited Ghana was surprised by large influx of foreign tourists and immigrants. If Ghana manages its fortunes well, it may be on its way to becoming the Dubai of West Africa.
Reasons for falling business and divesture of many companies from Nigeria are well-known and include unstable energy supply, insecurity, kidnappings, insurgency, ports congestion, poor railways infrastructure, import dependency of most manufacturing companies, high cost of forex, multiple tax regime, poor social infrastructure, heavy traffic around industrial estates, traffic gridlock to Nigeria’s major ports of Apapa and Tin Can Island, and sharp and shady practices of competitors who import finished products.
The Nigerian Senate recently raised an alarm over the exodus of local firms to Ghana in droves; blaming the development on unstable power supply. The legislators decided to investigate activities of the power transmission and distribution companies.
Government needs to do more than raising an alarm or conducting an investigation. The power sector needs to be fixed, policy somersaults on import regulation and tariffs should be avoided, local manufacturing industries should be deliberately protected, and massive investments should be made in social and industrial infrastructure such as roads, railways, and water supply.
Government, research institutes, universities, and companies need to invest heavily in research and development to develop local contents and substitutes for most raw material presently being imported.
Nigeria should review its free trade commitments, as no country including America completely opens its borders to the influx of foreign products. Dunlop and Michelin exited Nigeria because of sudden reversal of government policy on imported tyres from 40 to 10 per cent which created an advantage for importers of ‘Tokunbo’ finished tyres. Government should implement policies and regulations to discourage more companies from relocating to Ghana, as there are millions of graduates searching for jobs, and mouths waiting to be feed with earned income.
Nigeria is ranked 131 out of 190 in the 2019 World Bank annual rating of ease of doing business, which ranks countries against each other based on how the regulatory environment is conducive to business operations. Ghana was ranked 118 for the same period, implying the business environment in Ghana was not drastically different, as Ghana’s main edge is relative security and stable energy supply. If we fix power supply and insecurity, the exodus of corporate firms, manufacturing companies, and factories to Ghana would be less attractive.
Babalobi, a doctorate researcher, Department of Health, University of Bath, UK, wrote in via Babalobi@yahoo.com