By Mike Agunwa (Industry Editor)
The state of the manufacturing sector in the country calls for deep concern. In the 80s, Nigeria was a giant in the automobile industry as Volkswagen, Peugeot Automobile of Nigeria (PAN), Anambra Motor Manufacturing Company Limied (ANAMMCO) Dunlop tyre and Michelin were house hold names.
Nigeria was the hub of African goods with a rich deposit of raw material. NIGERIAN NEWSLEADER ONLINE investigation report, reveals that as from 1995, a crazy tariff regime, convolutions in power supply, importation of cheap substitutes, disjointed macro and micro economic policies and an unfavourable business environment, combined to cripple activities in the manufacturing sector.
The former president of the Manufacturers Association of Nigeria (MAN), Alhaji Bashir Borodo, disclosed that the absence of a conducive manufacturing environment and basic infrastructure would continue to draw back the sector since the country is now a mono economy.
The initial momentum in the construction of the gigantic Ajaokuta Steel Complex, during the administration of Gen Yakubu Gowon of 1975, lost oscillation in the dark days of Gen. Abacha. Ajaokuta Steel was designed to produce 1.3 million tons of liquid steel per annum in its phase one, with a capacity to expand its production to 2.6 million tons of flat iron and steel in its second phase while the third phase will produce 5.2 million tons of various types of steel products, including heavy plates. NEWSLEADER ONLINE found out that the fortunes of the company began to nosedive when it was concessioned to an India-based Global Infrastructure Holdings in 2004.
The company's export capacity dropped to 2,400 tons of re-bar while the phase 3 is now history. As at 2019, Ajaokuta Steel Company has gulped over five billion US dollars (One trillion naira) with no useful steel produced in the last 28 years. Former minister of Solid Minerals and now Ekiti State Governor, Dr Kayode Fayemi, during his 2016 Budget defence, said that it would not be in the nation’s interest to abandon the multi-billion complex.
Thus, president Muhammadu Buhari's administration has made it a priority to resuscitate the moribund Ajaokuta Steel Complex and Itakpe Iron and Steel Mill. With Buhari's recent marching order on bring-back Ajaokuta, the Nigerian government and the Russian Company that originally built the steel complex entered into a contractual understanding which both parties are currently studying the content of a draft Memorandum of Understanding.
Minister of Mines and Steel Development, Dr Olamilekan Adegbite, disclosed in kaduna recently after embarking on a facility tour of the National Steel Raw Materials Exploration Agency (NSRMEA), that the MoU will be formally signed with the Russian firm in January 2020 after which work commences on the Steel Rolling Mills.
The world class Aluminium Smelting Company of Nigeria ALSCON, established in 1996 on a 23,800 acres of land in Ikot Abasi community of Akwa Ibom state with 6 turbine engines for power generation, 9 cranes, 29 fork lifts, well equipped hospital, is now in ruins. NEWSLEADER ONLINE findings revealed that machineries were carted away and workers owed over N2.3billion severance allowance. At inception, the company had a work force of about 1,800 staff, produced over 40 thousand tons of grade A aluminum in one year and generated $120 thousand in a year, even at 25% production capacity.
But it can now boast of less than 100 staff who have not been paid for over a decade as the production capacity of the company is zero. The once viable company was at its peak sold to U. C. Rosal, a Russian company that could not even raise a financial bond which was a prerequisite for the bid as against BFIG group that fulfilled all the requirements as laid down by the National Council on Privatisation. U.C. Rosal wa expected to pay $250 million while BFIG bided for $410million. Rosal was unable to turn around the fortunes of the ALSCON and instead carted away all the assets of the company under the watch of BPE. In October 2019, the Federal High Court sitting in Abuja entertained a suit on whether the Bureau of Public Enterprises, BPE, has committed contempt, for not implementing the June 6, 2012 judgment of the Supreme Court on the Aluminium Smelter Company of Nigeria, ALSCON.
ALSCON, a $3.2 billion aluminium plant located in Ibekwe, Ikot Abasi Local Government Area of Akwa Ibom State, was incorporated in 1989 and began operations in 1997, but, was shut down in 1999 due to lack of working capital. It was privatized in 2007 as part of the Federal Government’s drive to revive moribund national assets. But since 2004, there has been a protracted litigation between BFIG Corporation and BPE challenging the bid process, regarding the enforcement and crystallisation of the mutually agreed Share Purchase Agreement, SPA.
The matter was adjudicated at various courts and on June 6, 2012, the Supreme Court ruled in favour of BFIG Corporation as the preferred bidder. However, BPE has not complied with the Supreme Court decision, but, pitched its tent with another bidder, a Russian firm known as UC Rusal. Lead Counsel to BFIG Corporation, Chief Patrick Ikwueto, SAN, said the firm was back to court in order to commit BPE and its Director General, Alex Okoh, for contempt of court. Ikwueto explained that the Supreme Court judgment was reaffirmed by the Court of Appeal in January 11, 2019, in a joint appeal filed by BPE and Dayson Holdings Ltd, with regard to BFIG Corporation's right to execute the mutually-agreed Share Purchase Agreement free from encumbrances. According to him, the Supreme Court order was that BPE should provide BFIG Corporation with the mutually agreed SPA before BFIG will pay the 10 percent of $410 million bid price.
But BPE has failed to comply with the order. However, a community leader in Ikot Abasi, Obong Amaeke Ntuk, expressed surprises when government advertised for the privatization of the company that was at the peak of production and had given the residents the rare priviledge of two years uninterrupted electricity supply. They threatened to take over their land for agricultural purpose if ALSCON fails to take off.
After almost 50 years of operations in the Nigeria, Michelin and Dunlop tyre companies, closed shop and laid off over 10,000 of its workforce. Neville Proctor, another tyre manufacturing giant is still struggling to stay in the market. According to Mohammed Yinusa, the chief executive officer of Dunlop Nigeria Plc, rubber and carbon black which is largely available accounts for about 70 per cent of the requirement for making tyre, this factor drove Michelin and Dunlop into Nigeria in the early 60’s. “With about 140 brands of tyres now imported into the country, most of which are junks, the country is merely helping to grow other economies at her expense.
When Michelin left for its home country, France, Dunlop raised the alarm, not knowing that it would soon stop tyre manufacturing in the country. “Dunlop tried to sustain itself but it could not because the year it folded up, the import duty on tyre was 10 percent and the import duty on raw materials was five percent. If you add the energy cost, you find that the import duty for importing raw materials is higher than buying tyres.
Given that scenario, the company preferred importing tyre to importing raw materials for production", Yinusa revealed. He further explained that for government to encourage production of goods and services in the country, zero import duty on raw materials should be encouraged while constant electricity supply must be put in place.
He said that over 3,000 direct jobs were erased at Michelin while more than 2,000 jobs were lost when Dunlop also closed its plants, adding that Dunlop spent about 2000 million naira monthly on power alone including N150 million spent on diesel as well as N50 million spent on NEPA bills. A Director in Michelin, Nnamdi Nwokedi, disclosed to NEWSLEADER ONLINE that the company is making more money importing tyres than manufacturing although they have lost a lot of market share in the tyre industry as the decision to close shop was inevitable due to high cost of overhead. “To be very honest with you, we are making more money now because we don’t have all those overheads any more.
Manufacturing generates a lot of overheads, even though it is desirable to do so for many reasons; such as the economy of the country you’re in, employment opportunities, public relation effects and the multiplier effect of generating jobs”, Nnamdi said . It is a shame that Nigeria, littered with a sizable number of cars, trucks and vans that keeps increasing every year, satisfies her tyre needs through importation.
As at today, there is no record of any tyre manufacturing company in the country but there are several companies involved in the importation of various brands of tyres. Polymer companies went through same harrowing experience. Mr. Joseph Imanah, National President of Polymer Institute of Nigeria, PIN, said, that companies resorted to generating sets for production which increased the cost of production. In comparism with India, Imanah said that while India has more than half a million plastic industries, Nigeria has less than 500, a situation that has made the country dependent on imported products. The Textile industry also faced the same challenge made worse when government lifted ban on importation of textile products coupled with the activities of corrupt custom officers who compromise government directives. Afprint, laid off 6,000 workers when it was edged out in the textile industry.
This was also the fate of Kaduna Textile Limited (KTL) when it closed down in 2002 as a result of unfavourable business environment. KTL owe about N687, 073,346 to its staff. With the influx of finished textile goods from China and Asia which are substandard but cheaper, Nigerian Textile Mills could no longer produce and break even despite the huge availability of cotton, a major raw material for textile. The foremost cement company in Nigeria, Nigercem, established in 1954 came to its knees in 2002 before it was privatized. Nigercem was jointly owned by the federal government which had 11 per cent, the five south-east states, 65 per cent and the general public, 24 per cent.
The privatization led to the emergence of Eastern Bulkcem Nigeria Limited with a 65 per cent stake. Ibeto Cement Company Limited, in 2012 acquired Eastern Bulkcem, with 60 per cent shares, Ebonyi State Government, 10 per cent, and the public, comprising institutions such as NICON Insurance Plc and the public 30 per cent. However the host community has frustrated all efforts from Ibeto to commence operations.
The infrastructure deficit in the country is still lingering and power supply has even gone worse. The transport sector is still comatose and the rail system is yet to be explored. Despite the recent change in the automobile policy that recently saw the emergence of Innoson Vehicle Manufacturing Company and the resuscitation of PAN and ANAMMCO, the industrial sector still contribute less that 10 percent of the country’s GDP.
Agric support services and food processing plants are yet to emerge. Our timber is still being processed abroad and the country is still relatively import dependent. It however needs a responsible government with the strong political will to match words with action to be able to lift the country to status of an African tiger in industrialization.