The problem of difficult access to
foreign exchange to procure essential raw materials for production by
manufacturers, among other challenges, has resulted in unprecedented job
losses in different sectors, with the electrical/electronic sub sector
feeling the heat,
Local manufacturers of electrical and
electronics items, including cables, meters, light bulbs, fittings and
accessories, have laid off more than 3,000 workers between March and
September this year.
This is as they continue to grapple with
low capacity utilisation arising from high cost of funds, competition
from cheap and substandard imports and general non-conducive operational
business environment.
Investigations by our correspondent
revealed that in addition to the challenges, the continued inability of
the manufacturers to access foreign exchange for the purchase of
essential raw materials and machinery for production in the past 21
months has taken a heavy toll on the sector, leading to more factory
closures and job losses.
For instance, a leader in the cable
manufacturing industry, Coleman Wires, has laid off more than 50 per
cent of its workforce within the period.
The Managing Director, Coleman Wires,
Mr. George Onofowokan, told our correspondent, “I am the Chairman of the
Electrical/Electronics Group of the Manufacturers Association of
Nigeria and to say there have been over 3,000 job losses in that sector
between March and now is putting it mildly.
“In our own firm, we have laid off more
than 50 per cent of our staff members. The market is not moving up;
inventory level and production are contracting. We invested N2.5bn in a
factory last year; that factory today is not functioning at up to five
per cent capacity because of lack of raw materials. Although we are
still servicing the loan we took to set up the factory.
“What makes the situation in the cable
industry more critical is the fact that 80 per cent of the raw materials
we need for production are imported and there are no local
alternatives, because the factories producing the local alternatives are
not functioning. Even if one was to get local alternatives, the funds
to buy them are not forthcoming from the banks.”
A former Chairman, Infrastructure
Committee, MAN, and Managing Director, Bennett Industries Limited, Mr.
Reginald Odiah, said his business of manufacturing and selling light
bulbs and fittings had become so challenging that he had sacked all his
employees and now relied on casual workers whom he only called when he
had any job to do.
The industrialist, who has been
operating in the sector for over 30 years, once had a flourishing
business making electrical appliances and accessories. He was at a point
the Chairman of the National Electricity Regulatory Commission’s
Technical Committee on Operationalisation of Micro-Grid industrial
Cluster Initiatives.
But he said things had got so tough that
he had to give up his factory space because he could not afford to keep
it going again, adding that the space was later acquired by a church.
Like Coleman Wires, the bulk of Bennett
Industries’ raw materials is imported and the company faces the
challenge of access to forex, but beyond that, Odiah said he had battled
high cost of funding and low patronage from Nigerians for long, which
had exposed his firm to unhealthy competition from cheap imported light
bulbs and fittings.
“Manufacturing locally is very
challenging. If I am borrowing now, I will borrow at an interest rate of
25 per cent for 360 days. When local manufacturers produce, taking all
the costs into consideration, their products are seen as expensive.
Even though the quality is better than the imported ones, people will
choose to patronise the imported low quality ones,” he explained.
Another local meter manufacturer and the
Managing Director, Mojec International Limited, Ms. Chantel Abdul, said
she had been playing a waiting game with the banks to see if she could
get forex to produce meters, which would be sold to electricity
distribution companies.
While waiting, the firm has had to scale down on the number of her employees, because of the lack of activity in the factory.
Abdul said, “Before now, we had issues
with patronage but since the campaign for local patronage started, the
Discos have been patronising us. The issue now is that we are unable to
produce enough meters to sell to them because a lot of our raw materials
are imported.
“Although the CBN has prioritised the
local manufacturing sector in terms of forex allocations, the quantity
is very low compared to how much we really need.”
She added, “In addition to this is the
lack of access to a single-digit interest financing to allow us produce
and sell to the Discos for future payment arrangement. That is the kind
of arrangement foreign suppliers are offering them, a situation where
you can supply them the meters and they pay over a period of 34 months
or more; but no bank is willing to give you a facility that lasts for
that length of time.
“This endless wait for forex may force our customers to turn to foreign meter suppliers.”
During a presidential policy dialogue
with Vice-President Yemi Osinbajo in August, the President, MAN, Dr.
Frank Jacobs, disclosed that 50 more companies had shut down between
March and September due to lack of raw materials.
According to Onofowokan, more than 1,000 manufacturing firms have shut down operations nationwide during that period.
As a way out of the problem, an analyst
and the Director-General of the West African Institute for Financial and
Economic Management, Prof. Akpan Ekpo, suggested that since the CBN had
opened a special window of intervention for the manufacturers and it
did not seem to be solving their problems, the apex bank should take
responsibility for disbursing the funds to the sector instead of leaving
it in the hands of the commercial banks.
He said, “There are CBN offices all over
the country. The manufacturers can access the special funds directly
from the CBN, and the apex bank can in turn monitor to see that the
money is well utilised. This is a short-term approach. In the long term,
Nigeria can start looking for ways of producing these raw materials
locally, or where it can import them cheaply from.
“Since what we basically have is a
supply problem, the manufacturers should endeavour to export what they
produce instead of just manufacturing for sale in Nigeria. If they
export, they can earn the forex they need for their operations instead
of relying on the government for supply.”
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