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Simon Kolawole: We’re killing industry in Nigeria softly, steadily

simon-kolawole

But this is Nigeria and you always suspected there must be a downside.

A friend visited me during the week. He is a young Nigerian full of hopes and dreams. His parents had wanted him to study Medicine or Pharmacy, but he had always been fascinated with Agriculture, so he put in for Agric Economics without their knowledge. They were angry when they discovered but it was too late. He travelled out of the country for his post-graduate studies. He did so well that the school wanted to employ him. He opted to return to Nigeria to pursue his first love. As a stop-gap, he worked in a bank and earned some good money. But he wanted to set up a poultry processing plant. That was what could make him feel fulfilled. He resigned his appointment and began the journey into… Well, let us hope the story will still end well.

He bought six plots of land somewhere in Mowe, Ogun State. After settling the “omo onile” (this social menace of land speculators has now been accepted as part of our culture – a clear sign of a failed system), he started building the factory. For electricity, he bought a transformer for N1.2 million. The “omo onile” demanded N250, 000 before they would allow the transformer to be offloaded from the truck! The PHCN staff are also asking him to pay N600, 000 as “approval fee” for the installation of the transformer – a service government is supposed to provide in the first place. As soon as he completed the building, council officers came with a bill of N4 million, saying the land was under acquisition by the state government. Where were these wicked guys all along?

My friend has refused to be frustrated. He has overshot his budget. There is no capital to kick start business. This is a firm that will not only generate employment but also create considerable economic activities, given the value chain that will ring it round. He has approached a few banks for funds, but this is no fuel import business, so they are not eager to touch him! One bank said the Ogun State governor is not signing C of O and governor’s consent, and it would therefore not be lending money to anyone doing business in the state. I listened to his story with so much sadness. I retorted: “You are not asking for contracts. You are not begging for political appointment. All you want is a space. You will generate contracts and employment by yourself! Why is Nigeria like this?”

While we were still at it, I heard that the Benue Cement Company (BCC) had been shut “temporarily” by its owner, the Dangote Cement Plc, because of the influx of subsidised cement into the country. Here we go again. After coming up with the “backward integration policy” – which is designed to encourage local production of cement – we made significant progress. Investors were allowed to import bulk (unbranded) cement and re-bag locally to meet the shortfall in supply while the expansion went on. Despite various summersaults along the line, the policy seemed to have worked so well as investments running into over $10 billion poured into the industry. Today, we have achieved local sufficiency and we don’t need to import again. For once, a government policy is working.

But this is Nigeria and you always suspected there must be a downside. What has happened now is that we have opened our borders to massively subsidised cement and clinker from China, Taiwan and Spain. Nigerian companies cannot compete with manufacturers in China who access funds at virtually zero interest and where low pour fuel oil (LPFO) costs next to nothing. There is no way Nigerian manufacturers can compete! China will overrun them any day! What Nigerian companies spend on powering their plants alone is killing, minus the other challenges of transportation and security. We are therefore dealing with enemies from within and without. By opening our doors to imported, subsidised cement, we keep Chinese, Taiwanese and Spanish factories running and tens of thousands employed over there, while we kill our local factories and hurt our economy. If BCC is finally closed down, sending 2,500 workers home, who loses? Who gains? What is the likely impact on other local cement companies as the tempo of importation increases? Is that how we are going to be world beaters?

Let me be honest about this: as an end user of cement, I want it cheap. I would love to buy a bag at N500. It will bring down my cost. But in an attempt to make cement cheaper, is there only one route – that of unbridled importation? We often celebrate South-east Asian countries for their development. These countries adopted policies that were not popular in economics. They actively designed policies to encourage local production and discourage importation. They deployed intervention funds and import-substitution policies that effectively turned them into economic powers and “Grade A” exporters. There were initial pains, but the end results stunned the outside world.

Our experience in telecoms has shown that if we get things right, Nigeria can make it. Acquiring a SIM card in 2002 cost about N15, 000. Today, you not only get SIM card for free, you even get free airtime as bonus. That is what fair competition eventually does to pricing. We were told per-second billing was impossible until Glo came and changed the game forever. That is the point. We hurt ourselves when we come up with policies that may be rewarding politically but damaging economically. In the long run, we suffer the consequences. We remain stuck in underdevelopment.

I am not asking for an outright ban on imported cement. That would offend the terms of the World Trade Organisation (WTO) which are designed to promote trade, largely to the detriment of underdeveloped countries which cannot really compete with the advanced countries. But since we are part of the WTO arrangement, there is no need to ban cement import. It, however, makes sense to checkmate dumping on Nigeria. With the instruments of duties and levies, we can bring about a fair sense of competition in the industry. We must avoid killing the cement industry the same way we have killed the textile industry with ill-conceived policies.

Really, whether we are talking about my friend’s start-up medium-size factory or the giant-size BCC, the underlining fact is the same: the country is very hostile to entrepreneurs who are genuinely interested in industry. We are so focused on sharing petrodollars every month that we cannot see beyond our nose. Those who want to provide jobs and generate economic activities for the good of all are basically discouraged and frustrated. God save Nigeria.

 

And Four Other Things…

INEC’S DE- REGISTRATION
I am against the decision of INEC to de-register 28 political parties. The Supreme Court settled this matter in 2003 when it ruled that the constitution guarantees freedom of association. The Electoral Act is not superior to the constitution. How many Nigerians know that the last US presidential election was contested by five parties? We only talk of Republicans and Democrats, but the Constitution Party, Green Party and Libertarian Party also fielded candidates, and nobody will deregister them under any guise. The Labour Party never won any election until Olusegun Mimiko took it over in 2007. Today, it has senators, reps and members of House of Assembly. It even has a governor! Imagine if INEC had deregistered the party before 2007…

BURNING BILLIONS
The residence being built for the Vice-President is now projected to gulp a total of N16 billion.  The executive secretary of the Federal Capital Development Authority, Adamu Ismail, said the budget is going up because of the “additional scope” introduced into the project. The Federal Executive Council had, in 2009, approved N7.1 billion for the design and construction of the Vice-President’s new official residence. Now, another N9 billion is required to complete the project, according to Ismail. This is a country that is borrowing heavily to meet its budgetary needs, and a new house for the VP is what will solve our problem. What a country.

CONSENSUS AGAIN?
After the fiasco that greeted the ill-conceived “Northern Consensus” candidature project in 2011, I thought some Northern politicians, who openly promote sectional divides, had learnt their lesson. But no. At the end of a conference on the “North and Strategies for Sustainable Development” in Kaduna on Friday, they issued a statement declaring that they had resolved to bring individuals and groups working in different directions “under one umbrella” in readiness for the 2015 presidential race. The North has every right to seek the presidency in 2015, but I think the strategy has to change. This consensus thing will not work.

BEWARE OF BOKO
The Christmas season is here again. Without being a security expert, I can conveniently guess that this is the sort of occasion that Boko Haram would like to strike. In December 2010, the terrorists struck at Mogadishu Barracks, Abuja. On Christmas Day last year, they struck at St. Theresa’s Catholic Church, Madalla, Niger Delta. That caught everyone by surprise. It is logical that they would want to strike again. I would therefore urge everyone to be careful – whether going to a church or partying. Thank you.

 

This piece was first published on ThisDay Newspapers

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Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija.


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Comments

  • You all talk too much, and some are even part of the problem; I’ve encountered them here when I try to contact them having been impressed by their write-ups.

    I challenge you to a discussion on this or any other topic on Nigeria and progress( it seems both should never be found in the same sentence). I am immeasurably frustrated.

    @OIbhagui

    Oseiwe Ibhagui December 9, 2012 9:27 am
  • I started an oil mill seven years ago, to prepare for my retirement. I went through a very difficult process to get it registered by NAFDAC. We were producing groundnuts oil. The cake was used by chicken farmers and the sludge for soap making. The business was meant to help our farmers. I am forced to close permanently. Reasons:- 1.Multiple taxations. 2. Too many regulatory bodies 3. Difficulties in obtaining credit and high cost of money.4. High production cost because we have to use generators. 5.Government policy of allowing import of cooking oil with import duty waiver, making it cheaper than what we produce locally.
    I have totally lost confidence in all the economic policy pronouncement. If you add corruption to all, then forget
    About industrialization and agriculture. The result will be massive unemployment and social unrest. God save us and let our leaders serve Nigeria

    Dr Shehu Mahdi December 9, 2012 9:42 am
  • On killing Industry in Nigeria, thank you Simon Kolawole, you spoke well and that’s nothing but the truth. Our problem is that most of us are selfish 1, and 2, we define personal success by our account balances. Recently I spoke to someone about producing a particular item for commercial purposes, he immediately said I could produce it in Italy and brand it in my name (I’m a Nigerian, I live in Lagos), I was like NO! fine I’ll make profit, may be more than what I’ll make if produced locally, but it would make Nigeria poorer. I just wish/hope/pray/desire that we would focus on producing electricity; it would solve half our problems in Nigeria

    OmogeNaija December 10, 2012 9:24 am
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