Friday, 24 June 2016

PALAVER TREE COMMENTARY: The Myth Called Made-In-Nigeria — Bukola Adebayo

Kaduna Refinery Image: Supplied
Bukola Adebayo writes on the effect of importation of raw materials on Nigerian economy, especially the manufacturing sector

Kudos to our indefatigable manufacturers in Anambra State. One cannot help but marvel at the ingenuity of finished goods that are churned out by designers and traders in the industrial estate and market in Onitsha, the commercial capital of the South-East.

Shoes and suits from the Ariaria market in Aba can be found in closets of top Nigerian celebrities home and abroad. North or South, local manufacturing of finished goods such as beverages, clothing items and other consumers products have increased tremendously.

Apart from suits and shoes, if one checks the labelling on many household goods and confectioneries in most homes, one would see ‘Made-in-Nigeria’ or a complimentary local address.

One is also likely to find the addresses of local companies on many of the drugs used to treat common ailments like diarrhoea, headache and malaria infections.

However, investigations revealed that even though many of these products are said to be “Made-in-Nigeria”, they are actually made abroad.

Manufacturers, who spoke with our correspondent said due to unfavourable policies, lack of infrastructure and investment and the moribund state of the petrochemical and agricultural sector, more than 90% of the raw materials they use are imported from Italy, Germany, China and other countries.

For instance, the only raw material that is sourced locally in the production of sachet water, popularly known as ‘pure water’, is the water itself.

According to the Managing Director, El-Elyon Water, a producer of sachet water in Ibadan, Oyo State, Mr. Tola Adeniyi, 80% of the chemicals used in purifying water and the petrochemicals  used in producing the sachet are imported.

Adeniyi said, “When sachet water manufacturers increased their prices in January from ₦80 to ₦120 per bag, many thought it was informed by fuel scarcity. But the increment came about because of scarcity of forex.

“You may wonder what forex has got to do with sachet water. We import every other material used to purify and package it. None of these chemicals are sourced locally.

“The raw material used to produce the nylon and print materials are imported; the chlorine and other oxidizing agents used to purify the water is imported. The prices of these raw materials have increased by 30% and we can’t shoulder the cost alone.”

It is, indeed, disheartening that Nigeria, the seventh largest producer of crude oil in the world, is also one of the largest importers of petrochemicals, a byproduct of crude oil.

Speaking on the challenges posed by the lack of raw materials in the packaging industry, the Marketing Manager, OAK Group of Companies, producers of Lasena water and plastics, Mr. Eugune Osigwe, warned that the prices of bottled water might increase, as the cost of importing preforms, the raw materials used to produce plastic packaging for water and other drinks, has increased.

According to Osigwe, one  tonne of  the preform, which is imported from China and was ₦450,000 last year,  is now ₦520,000.

Osigwe said, “The plastic and paper industry in Nigeria is 90% dependent on importation. Yes, there are factories producing them, but where are they getting the raw materials? For instance, the pre-chemical form used to make plastics are got from petrochemicals, a by-product of crude oil. How many of our refineries are producing fuel not to talk of the petrochemical used to make plastics? If the refineries were working optimally, we would have no reason to import plastic preforms. We would rather be exporting them to other non-oil-producing countries.”

Apart from exporting crude oil, Osigwe said, if the refineries were functioning, Nigeria should be exporting rather than importing leather, alcohol, fertilizers and other carbon based products .

He said many tyre and leather manufacturing companies left the country when the hope of getting raw materials locally dimmed.

“Leather is a crucial by-product of crude oil. It can be used to make chairs, tyres, shoes, bags and upholstery just to mention a few. With the crude oil reserves that Nigeria has, it should be one of the biggest players in tyre and leather industry in the world, but we are still importing artificial leather from China and Brazil.

“It’s an open secret that Nigeria imports fertilizers for its farmers, which is a disgrace. Nitrogen and many chemicals that are used in making fertilizers are by-products of crude oil. If the refineries were on, we should be exporting, not importing, fertilizers to agric-based economies like Brazil and the United States. It would have been be a source of forex which the country direly needs now.

“More than 40% of the chemicals and raw materials used in paint and print industry can be sourced from crude, but we are still importing them. Oil has been a curse rather than a blessing to this country.”

Adeniyi and Osigwe have every reason to be pained. Nigeria has indeed underutilized the resources that abound in crude oil.

Apart from PMS, a report compiled by Ranken Energy, a global manufacturer of petrochemical products, states that over 5,999 items are made from petroleum by-products.

They include drugs, cosmetics, detergents, perfume, insecticides, vitamin capsules, floor wax, paints and dyes to mention a few.

A partial list of products made from Petroleum (144 of 6000 items) 

One 42-gallon barrel of oil creates 19.4 gallons of gasoline. The rest (over half) is used to make things like:

Source: Ranken Energy

70 % of medicines are imported from India, China
Stakeholders were elated when four pharmaceutical companies in Nigeria got the World Health Organization pre-qualification to produce some essential drugs for West Africa and beyond.

Experts in the sector proclaimed that the certification was a guarantee that Nigeria had the capacity to manufacture and export lifesaving medicines to West African countries and Africa at large.

But no one was more surprised when the Chairman, Pharmaceutical Manufacturers Group of Manufacturers Association of Nigeria, Mr. Okey Akpa, sent a warning to Nigerians to prepare for scarcity of drugs.

Akpa said that the lingering shortage of foreign exchange had prevented drug manufacturers from importing raw materials and chemicals needed to produce essential medicines into the country.

According to him, many drug manufacturers have run out of their stock and are unable to replenish due to dollar insufficiency.

Akpa said, “The only thing to say at this time is to alert the nation to an impending risk and threat to drug security in the country. This is going to happen if the current level of scarcity of forex persists.

“There is going to be absolute drought of raw materials. This time, we are talking about critical raw materials, what we classify as active pharmaceutical ingredients. Nearly every manufacturer is using about the last batch of raw materials and what we see and foresee is scarcity of medicines – essential medicines. When they are available, the cost will go up.”

Akpa had every reason to raise the alarm. Nigeria, with a population of over 170 million people, depends on India and China for its drug supply.

According to the former President of the Pharmaceutical Society of Nigeria, Mr. Azubuike  Okwor, over 70% of medicines  consumed in the country are imported.

He blamed the moribund state of the refineries for this situation. Okwor said local pharmaceutical companies need not import if active ingredients used to produce medicines if the refineries were working.

He stated, “On local manufacturing of drug, a greater percentage of the active ingredients for the local initiatives are all imported, and this is why we call for the creation of a pharmaceutical commission to drive Nigeria’s journey towards local manufacturing of pharmaceuticals replicating the giant strides that China and India have made in these areas.”

Much ado about tomatoes
If you have had any cause to buy tomato paste at the market because of the ongoing tomato scarcity, there is a great possibility that you are consuming a product whose raw material was sourced in an Asian or European country but packaged in Nigeria.

According to the Director-General, Raw Materials Research and Development Council (RMRDC), Peter Onwualu, Nigeria spends over ₦11bn on the importation of 65,809 tonnes of processed tomatoes annually.

Though Nigeria is ranked the second largest producer of tomato in Africa and 13th in the world, the country is also the largest importer of tomato paste, the processed form of the fruit from China and Italy.

According to the Chief Executive Officer, Erisco Foods Limited, Ikeja, a local manufacturer of tomato concentrates, Mr. Eric Umeofia, the Federal Government loses US$1bn to the importation of tomato products.

Umeofia alleged that 80% of imported tomato products in the market were sourced abroad, and they were also adulterated.

He lamented that instead of exporting packaged products, Nigeria was the destination for adulterated tomato concentrates from Asian countries such as China.

Umeofia said, “More than 1,000 containers of packaged tomato paste come in through our porous ports and borders every week. Nigeria is losing US$1bn to tomato paste importation annually. These importers are mostly foreigners, and they have introduced fake tomato concentrates into this country. Once you don’t produce and depend on import, then you give room for fake items.

“Indian businessmen went to China and asked them to produce tomato paste at a reduced cost. Of course, the Chinese did so by reducing the content of tomato and filled it up with starch and added colouring.

“Our research over two years found out that much of the tomato paste they bring into Nigeria is poison. In China, they can’t eat the tomato products that are being brought into this country. So, why are the Indians bringing it here? Because some few government officials and regulators are aiding and abetting these practices, Nigerians will be dying?”

Umeofia described the situation as unfortunate as 70% of tomatoes grown in the country waste due to lack of storage facilities and infrastructure for processing.

“The tomato farmers in Sokoto State suffer great losses every year because there is no facility to store and process them; and the government supports importers rather than helping local manufacturers.

“We decided to go into tomato refining and set up a factory with a capacity of 250,000 tonnes to stop importation but we have been running it at a loss because imported ones are still coming in. By now, we are supposed to be exporting tomato paste from Nigeria. We have the capacity and all it takes to achieve it, if government provides the right policies,” he noted.

Umeofia called on President Muhammed Buhari not to relent in his administration’s bid to ban the importation of tomato products, which, he said, would encourage patronage of local products.

According to him, many local manufacturing companies have shut down due to unfriendly policies.

He said, “In 2015, we almost closed down. We couldn’t sell our tomato products because the fake ones were cheaper to buy.  Because the President said no product that could be made in Nigeria would have foreign exchange allocation, that was when our business started to pick. Now, we have recalled all the workers we sent away and we are now employing more. The import law is already having effect.  If Buhari bans the importation of tomato, we will be exporting tomatoes within 18 months.

“If the Federal Government and regulators give manufacturers 20% of the support they give foreign investors, we would become one of the biggest exporters of tomato products in the world.

“Do you know that the tomato paste industry can create over one million jobs, from the farmers to the engineers, the processors to the marketers? We need foreign investment, but it’s only on technology, not on practical goods. The Made-in-Nigeria campaign can only survive if importation is discouraged entirely,” he added.

This file photo taken on January 15, 2016 shows a trader sorting baskets of tomatoes at the Yankaba vegetables market in northern Nigerian city of Kano, on January 15, 2016. A state government in northern Nigeria on May 24 declared a state of emergency after moths destroyed swathes of tomato fields, threatening supplies of the country’s leading staple food. Nigerian farmers describe the outbreak as ‘tomato Ebola’ after the deadly disease that devastated West Africa in 2014. PHOTO: AFP
The myth called Made-in-Nigeria food
Before oil boom, Nigeria was one of the highest producers of grains, vegetables and food crops in Africa.

It was a taboo to eat food products that were not grown in the country due to abundance of agricultural produce.

The reverse is the case nowadays. According to the Chief Executive Officer, Produce Extracts Limited, Lagos, makers of locally produced wine, Mr. Linus Kotey, more than 80% of locally produced soft drinks and beverages sold in Nigeria are made from imported concentrates.

Kotey, a brewer of over 30 years of experience, spoke to our correspondent when she visited his brewing company at the Lagos State Small Scale Industrial Estate at Matori. He warned that manufacturers’ dependence on raw materials from abroad, especially for food production, could collapse the Nigerian economy.

Kotey said, “Many of the beverages and soft drinks sold in Nigeria are made from imported concentrates. Manufacturers find it difficult to go through the chemical process of converting fresh fruits grown in Nigeria into drinks.  I use local pawpaw and pineapple to make wine, but many brewers won’t do that.

“What the manufacturers do is to add water and sugar to the imported concentrates, pack them and millions of Nigerians consume them.

“That does not help the foreign exchange and the backward integration of local contents. It is sad because more than half of the fruits produced by farmers in the country go to waste. Nigeria spends billions importing raw materials it can produce because there is forex and manufacturers want to take the easy way. The truth is out now because there is shortage of forex,”

Bread, noodles and wheat flour products that Nigerians eat daily are said to be “Made-in-Nigeria”, Kotey, a UK-trained biochemist says this label may be far from the reality.

According to the industrialist, a significant proportion of the raw materials used in manufacturing these food products are imported and poor manufacturing policies from previous governments have allowed the trend to thrive.

Kotey said, “In the brewery industry at the first regime of Buhari, the government banned the importation of barley malt used to produce beverages because Nigeria had sorghum, which is an alternative. The multinationals argued against it but the government put its foot down.

“I was a brewer and I was on the government panel, the companies had to implement it. Nigerians were drinking beer from sorghum and they didn’t know the difference. The policy was overturned by the government that took over, as local farmers who had geared up to produce maize and sorghum lost huge sums of money.

“What the foreign companies do now is that they use 5% sorghum from Nigerian farmers and import barley malt for the rest and it is still called Made-in-Nigeria.”

Besides poor policies on the part of government, Kotey said Nigerians had also stopped eating local foods; they show preference for staple foods whose raw materials, according to him are sourced abroad.

“There is ongoing food colonization in Nigeria. I studied in Britain. Britons eat potatoes fried, mashed and baked. They also grow wheat which they use to make pie or bread. They eat what they grow. Why are we not eating what we grow? Now everybody is eating noodles, wheat, semolina, bread and pastries. These are made from wheat that is imported.

“We are promoting the agricultural sector of another country. What is wrong with eating fufu, garri, yam flour, amala and yam in different forms?  If Nigeria stops the importation of wheat today, I can assure you that the agricultural sector will bounce back.”

Chinese ankara dominates at  Owambe parties
The Nigerian textile business was one of the most vibrant industries in Africa in the 1960s.Traders from Ghana, Mali, and Cote d’Ivoire, among others, came to Nigeria to export the high-quality African print.

Today, the once-flourishing industry has collapsed such that over 80 of the 100 textile industries that used to dot the major cities of Kano, Katsina, Lagos and other parts of the country no longer exist.

According to the Nigerian Textile Manufacturers Association and the Nigerian Textile Garments and Tailoring Employers Association (NTMA/NGTEA), China and Korea-made fabrics have dominated Nigerian market.

The Director-General, NTMA/NGTEA, Mr. Jaiyeola Olarewaju, stated that the policy by the previous governments which lifted the ban on the importation of textiles led to the collapse of over 70 textile companies.

He said that despite the ₦100bn pumped into the textile industry by the Federal Government, the sector had failed to recover from the lifting of the ban on importation of fabrics.

“The Chinese textile manufacturers are squeezing the local industry.  The Chinese fabrics have taken over the market. About 80% of the printed fabrics in the country are imported. So, it is Asian countries that are enjoying the boom in the use of African prints, not Nigeria.

“In 1997, we had about 136,000 workers. Now we have less than 20,000. Now that the government has lifted the ban on importation, what protection is there for local textile industries?”

Way forward
Nigeria is one of the most attractive dumping grounds for exporters due to poor policies and porous borders. The country still imports furniture, pencils, matches, tooth picks and other consumer goods that it has the capacity to produce.

According to Kotey and his colleagues, a majority of the products found in a Nigerian household are imported.

Stakeholders who spoke to the Punch correspondent called on the Federal Government to protect local manufacturers by providing incentives.

According to Kotey, the only way out is for the Buhari administration to ban the use of imported raw materials for products that are available locally as it did in the 70s.

He said, “There was a time that multinationals were using local flavours for their beverages. We must go back to that. If the government can insist that no manufacturer should bring in raw materials that can be sourced locally, the economy will thrive.

“Those who want to still import must be made to pay heavy duties and taxes for this. Gradually, manufacturers will seek alternatives locally and we can reduce the pressure on the foreign exchange available.”

Originally published in The Punch

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