The fact that many companies have divested in Nigerian economy is no longer news. The disturbing issues are will Nigeria ever absorb the shock of this companies exodus?
There’s no smoke without fire. In 2015, Automotive Gas Oil (AGO) was N110 per litre; today it’s N240 per litre. Kerosene was sold at N50 per litre; today it’s N350 per litre. Premium Motor Spirit was N87 per litre; today is N145 per litre. Exchange rate was N229/$; today is N360/$. Why should any reasonable investor invest in Nigeria with all these economic indices?
We have not talked about deplorable security situation and intimidation of the citizenry by the Security Operatives.
For the most part of the last 10 years of Nigeria’s democracy, there has been near collapse of infrastructure. The development has been so bad that most businesses groan under intense pain due to overhead cost incurred in providing alternative infrastructure like power. In fact, power has become an albatross to the nation’s manufacturing sector.
For instance, in 1999, manufacturing sector accounted for not less than five percent of the Gross Domestic Product (GDP). This shrunk to 4.9 percent in 2000.
As a result of high cost of production that results from inadequate infrastructure, the manufacturing capacity utilization remains on the down side.
The manufacturing sector is further bogged down by massive decline in capacity utilisation resulting from high exchange rate of the Naira and congestion at the ports. Prior to the financial meltdown, the manufacturing sector had not fared better largely due to lack of infrastructure and high production cost.
President of the National Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA), Simon Okolo said there has not been significant improvement in infrastructure.
According to him, industrial/commercial centres continued to witness heavy traffic, thereby constituting undesirable delays to motorists and other road users while the rail and mass transit schemes did not receive the desired boost necessary to transform the transport sector.
272 firms shut down in one year – MAN
Manufacturers and other private sector operators on Tuesday painted a gloomy picture of how the foreign exchange restriction placed on 41 items by the Central Bank of Nigeria had affected operations in the business sector.
They said that since the restriction order was placed last year, about 272 firms had been forced out of business, 50 of which were manufacturing companies.
Owing to these, the domestic economy witnessed an unprecedented closure of factories and production plants last year.
Indeed, it was a confirmation that the nation’s domestic economy was sinking. With the weakening economy, more sectors were being affected by the recession and the unemployment profile kept rising.
The president of the Manufacturers Association of Nigeria (MAN), Alhaji Bashir Borodo disclosed to Sunday Trust that absence of conducive manufacturing environment and basic infrastructure would continue to draw back the sector, except something urgent was done to reverse the situation.
According to him, the dream of Nigeria being an exporter of manufactured goods would remain a mirage since Nigeria had thrown away agriculture and blindly embraced oil export.
The recent decision of some companies that had bases in Nigeria to relocate to Ghana was another confirmation that the nation’s industrial sector was still held in hostage.
A survey conducted by the Bank of Ghana recently revealed that Nigeria was one of the 10 sources of Foreign Direct Investment in the former Gold Coast.
Nigeria placed 9th with a contribution of 2.1percent of the GHC1.5billion invested in Ghana in 2007. Nigeria’s pre-eminence in the business environment of Ghana was further re-enforced recently when Ghana’s President, John Atta Mills visited Nigeria’s president in Abuja.
The president who reportedly spearheaded the move of asking Nigerian manufacturing firms to relocate to the former Gold Coast assured that his government would provide a congenial environment for the investors as well as give them some incentives.
According to him, some of these incentives were 15-year tax holidays, free land and other policy initiatives which would drive their businesses.
Last year, Dunlop Nigeria Plc., the only surviving tyre manufacturing company in Nigeria then, shut down its plants and laid off hundreds of its workers and put some on half pay.
Dunlop Nigeria Plc and Michelin had relocated to Ghana. Patterson Zochonis (PZ) is also planning to relocate to Ghana, even as Cadbury Nigeria Plc, Unilever and the International Institute of Tropical Agriculture (IITA) this year, sacked sizeable number of their workers over reported high cost of production, decaying infrastructure as well as the ravaging global economic recession.
Unconfirmed sources also said Guinness Plc was already putting spanners into works to move its business to Ghana, while some companies were said to have expressed readiness to move.
However, External Relations Manager of Dunlop, Sola Adebanjo said his company did not relocate to Ghana. He said the rumoured relocation of the tyre company stemmed from its drive to establish sister branch in the Gold Coast.
He told SundayTrust that the Dunlop version of Nigeria was still intact and operational.But not many Nigerians would buy Adebanjo’s position.
Recently, members of the Lagos State House of Assembly expressed concern over the relocation of manufacturing companies.
This was brought to the attention of the House under Matters of Urgent Public Importance by Sanai Agunbiade, chairman, House Committee on Commerce and Industry.
Agunbiade said manufacturing companies in Nigeria were already folding up, to relocate to Ghana and take advantage of the liberal investment incentives there.