Share this story
ONCE upon a time, a manufacturing company stood in the heart of Nnewi, the industrial hub of the south-eastern state of Anambra, Nigeria.
The company, known as Louis Carter Industries, produced plastic gallons, basins and other plastic products.
Customers visited Nnewi from different parts of Nigeria to buy these products. A lucrative company with many customers, it had over 40 members of staff in different production lines.
In 2016, however, one year after President Muhammadu Buhari came to power, the company, established in 1989, began to wobble. There was suddenly a foreign exchange (FX) crunch due to declining oil prices, and many manufacturers could not have access to dollars with which to import their raw materials.
In 2016, manufacturers imported 48 per cent of their raw materials using mostly dollars, according to the Manufacturers Association of Nigeria (MAN).
Financial analysts had expected the Central Bank of Nigeria (CBN) to float the FX market to boost dollar supplies, but the bank adopted exchange control measures by restricting access to domiciliary accounts and barring 41 items from having access to the official FX market.
Incidentally, one of the items excluded from the official FX market was polypropylene, which is commonly used for plastic mouldings.
By excluding the items from the official FX market, manufacturers could only import them using foreign exchange sourced from black or parallel markets.
In 2016 when the FX crunch began, one dollar exchanged for N197-N199 at the official market, but the black market rate was up to N20 to N40 higher. By sourcing the FX at the black market, several firms saw their production costs surge, according to the then President of MAN Frank Jacobs.
The exchange control happened with the support of President Muhammadu Buhari.
Even for items not restricted, it was difficult for manufacturers to get FX to import them.
Louis Carter struggled silently to access foreign exchange to import polyethene, ethylene, vinyl and chloride – other major raw materials for the production of plastics.
But that was not the only challenge. Energy cost was rising because the company was using alternative electricity sources due to the insufficient electricity supply to Nnewi by the Enugu Electricity Distribution Company (EEDC).
In 2016, manufacturers spent N129.95 billion on alternative energy sources as against N58.82 billion in 2015, MAN said.
Due to a ballooning production cost, Louis Carter could no longer survive and was forced to shut down in 2017, with the staff rejoining an already crowded labour market.
“We had a major challenge with energy costs,” General Manager of Louis Carter Industries Ndubuisi Okoli told The ICIR with some air of bitterness.
“The EEDC was not giving us power. Also, we had issues with getting raw materials for production,” said Okoli.
A report in the Journal of Health and Pollution said about 14.2 million tons (nearly 510,000 20-foot containers) of plastics in primary form were imported into Nigeria between 1996 and 2014.
The ICIR’s investigation shows that many manufacturing companies are dying silently, and they blame their demise on President Buhari’s administration policies.
It took the reporter more than one month to find some of these companies and interview their former officials or those close to them, where possible.
Because the closures of the manufacturing companies are not always reported, government officials do not take notice or pretend not to.
Moak Enterprises was once one of the biggest bottled/sachet water companies in Sango-Ota, an industrial zone in Ogun State, South-West Nigeria. A producer of ‘Meridian Waters,’ the products were consumed by the young and the old. An ultramodern company, Moak produced several trucks of sachet water each month and supplied to wholesalers and retailers in Ogun State and beyond.
According to The ICIR‘s findings, the company broke even in 2014 -one year after its establishment. But seven years after, it was under lock and key.
“I struggled till July this year (2021) before I shut down the company,” Chief Executive Officer Olatunde Akintunde told The ICIR.
“The reason is that we could not buy raw materials again due to naira devaluation. We used to buy pre-forms ( used in forming sliced fibre threads) at N400,000 three to four years ago, but the price has risen four-fold to N1.6 million,” he said.
“The production cost is very high, and customers are not buying as we transfer these costs to them.
“Since 2015, when the present government came in, our company has been struggling due to bad policies.”
The story of Procter and Gamble (P&G) is hard to forget. Unlike the other two, the shut-down of P&G was reported by the media, though many of the reports did not provide clarity as to why the firm closed its production segment.
In March 2014, P&G set up a $300 million diaper plant in Agbara, an industrial cluster in Ogun State. It was celebrated by the government, being the United States’ biggest non-oil investment in the country.
Sub-Saharan Africa Government Relations Associate Director of P&G Temitope Iluyemi noted that the plant would contribute to the growth of Nigeria’s economy.
However, four years after the fanfare, the company released a statement announcing its decision to quit production.
A statement signed by Lola Adenuga of the company’s communications unit in 2018 said P&G would scale up its contract operations and invest in local talents.
“P&G is restructuring its Nigeria manufacturing operations to deliver a more effective business operation for now and sustainably for the future,” the statement read in part.
“This will entail an exit from production in its Agbara plant. We will strengthen our manufacturing operations in the Ibadan plant, scale up our contract manufacturing operations as well as continue to invest in our local talents.”
While this was the company’s statement wanted the public to believe, the reporter found from those familiar with P&G’s operations that the company stopped production in Agbara due to rising production costs caused by high import duties and energy costs. The company was importing most of its raw materials but was hard hit by high tariffs set by the government and FX crunch, which affected its capacity to import raw materials.
BusinessDay reported that the company was also frustrated due to its “uncompromised stance and failure of the firm to bribe Customs officers and other revenue agencies.” In 2018, the reporter had attempted to speak with the Nigeria Customs Service over the allegation but got no response.
Mothers Pride Ventures produced thousands of pet bottles, nylon and plastic cans in Asaba for over five years. However, it shut down in 2018 over high production cost.
Managing Director of the now moribund company Jimoh Dayo explained to the reporter that the company went out of business due to the inefficiency of Benin Electricity Distribution Company (Benin DisCo).
“The way DisCos are handling power is not the way it should be,” he said.
“They provide electricity to whoever they want. The privatisation of the power sector (in 2013) should not have been done. Lack of power supply from them killed us off.”
Dayo further said that he was diversifying away from manufacturing, telling the reporter indignantly that “your efforts to call attention to the Nigerian manufacturing sector wobbles will be a fruitless one. You are wasting your time.”
Nigeria had a privatisation exercise in 2013, where government energy facilities were sold to the private sector. Power supply has not improved since then, say Nigerians, as generation is about 7000 megawatts (MW) and distribution between 3,000 and 5000MW – for a population of over 200 million people.
Nigerian manufacturers self-generate 13,223.67 mega MW of electricity, according to a survey carried out by the Nigerian Energy Support Programme and Deutsche Zusammenarbeit (GZ) in 2015.
With 102 million people, Egypt generated 24,700MW as far back as 2010 and nearly all of the population had 100 per cent electricity then. With an inefficient energy sector, even South Africa has a domestic electricity generation capacity of 58,095 megawatts (MW) from all sources, especially coal, according to Power Africa.
The story of Tower Aluminum is also an interesting one. It was a household name in Nigeria in the 1970s and 80s. The company was set up in Nigeria in 1959 and served several homes with pots, plates, spoons and roofing sheets.
However, issues such as the influx of cheap and substandard products into the Nigerian market whittled down Tower’s foothold in Africa’s largest economy, according to sources close to the company.
Tower’s trouble escalated in 2016 when Access Bank filed a petition before a Federal High Court in Lagos against it over an alleged debt of N2.6bn. Four years later, the company closed down, with workers accusing it of illegally retrenching them.
The ICIR gathered reliably that Tower has got a lifeline, having been taken over by African Foundries, one of the major steelmakers in the country.
In the steel industry, a sector that produces inputs for other manufacturers, many firms have shut down in the last six years.
Universal Steel, a producer of iron rods, has gone under due to what industry players have described as “inability to import cold rolled steel and high import duties.”
Industrial And Farm Equipment Company, a maker of wheelbarrows, has also exited the Nigerian manufacturing sector.
Grief Industries, maker of aluminium drums, is also one of the companies that have exited the sector.
Also, Federated Steel from China, maker of iron rods, has exited Nigeria and sold its assets to MNIL Limited.
Similarly, Gorgeous Metal Makers, based along Abuja-Kaduna Expressway, Kakau, shut down in 2018 over Nigeria’s harsh doing business environment.
The company, which produces iron tanks and iron containers for long vehicles, did not do business in 2019 and 2021, according to its Managing Director Murphy Ugwu.
The firm also specialises in building rail tracks.
“The issue is the set of policies. Most of the raw materials we are using are imported, so when you do not have foreign exchange, you can’t import,” Ugwu told The ICIR.
“For our railways, we have the skills and the capacity to transfer technology with our local partners, but we have an issue with the implementation of local content laws in the construction of railways. We have the capacity and should be allowed to participate in it.”
He said he was hoping to return to production in 2022.
Sky Aluminium in Jos, Plateau State, has also gone under owing to lack of patronage, smuggling of aluminium products into Nigeria and high production cost, The ICIR gathered.
Chief Executive Officer of Qualitec Industries and former chairman of Manufacturers Association of Nigeria (MAN) Basic Metals and Steel Group Oluyinka Kufile told The ICIR that many companies in the steel sector had died due to poor policies.
“The Minister of Finance is still approving the export of scrap metals, which serve as raw materials for some companies, forcing firms into importing what we already have here,” Kufile alleged.
Scrap metals are in the Nigeria Customs Service (NCS)’s Export Prohibition List, meaning that they are banned from being exported.
Special Adviser to Finance Minister on Media and Communications Yunusa Tanko Abdullahi denied the allegation, saying that “the Hon Minister is not the Minister of Trade and Industry so how could she do that?”
A spokesman for the Minister of Industry, Trade and Investment Ifedayo Sayo said he was not aware that the minister ever approved scrap metals for export.
“I do not think that the allegation is true, and to the best of my knowledge, I am not aware of that,” he said.
He noted that the minister had supported those wishing to import machines and manufacturers seeking to access FX for import of important raw materials.
He further said that issues around energy, FX, ports and infrastructure affecting manufacturers were not within the purview of the minister, noting, however, that he had done his best on what was within his remit.
But Kufile said the absence of a smelter plant in Nigeria had killed the steel sector and forced the players to import raw materials used by aluminium firms.
“The issue is that there are no dollars to import ingots and even when you import, it is difficult to get it out ports due to delays. This is because we don’t have a smelter plant. The one we have in Akwa Ibom State is not working,” he further said.
Wempco state capture and steel industry problems
In 2013, former President Jonathan commissioned a new multi-billion-dollar cold rolled steel plant.
It was built by a Chinese company, Western Metal Products Company Limited (WEMPCO) Group, in Magboro area of Ogun State.
President Jonathan said the new plant would provide employment importunities for the citizens and revive the industrial sector.
He further said that the facility was a demonstration of the company’s faith in the Nigerian economy, stressing that the firm’s participation reinforced steel as the most important material for domestic and industrial use.
The plant had an installed annual capacity of 700,000 tonnes with an additional expanded capacity of 300,000 tonnes per year.
After the inauguration of the plant, the government backed the company with incentives. Only Wempco was allowed to produce annealed cold-rolled steel, an essential input used by producers of drum, iron rods and other aluminium products.
The company’s importation of raw materials was incentivised by the government. Wempco continued to supply the product to the downstream segment of the market till Buhari came to power in 2015.
In 2016, the Central Bank of Nigeria (CBN) placed cold rolled steel of any type on the list of 41 items not eligible for foreign exchange due to the belief that Wempco had the capacity to satisfy the market.
That meant that the entire industry depended on only one company to provide them with the product.
Rather than produce the item as agreed with the Federal Government, Wempco obtained import waivers to bring in the finished products from China and other countries, industry players say.
“The company had never produced any type of cold-rolled steel, but it used its closeness to power to manipulate the industry,” said Kufile.
Kufile’s view was shared by several players in the industry, including Wahum Packaging Industries, who told the reporter that it was shutting down due to lack of annealed cold rolled steel.
The reporter had made efforts to speak with Lewis and Robert Tung in 2017, owners of Wempo, to respond to the allegation but it was not possible as the two were inaccessible.
In 2020, the Federal Inland Revenue Service (FIRS) placed a restriction on the account of the company over non-payment of N200 million tax. It was also reported that the group was selling its luxury Oriental Hotel in Lagos at $250 million, though it denied it, saying “there has never been and there is no intention of the WEMPCO Group to exit Nigeria as stated in the reports.”
The company has eventually shut down its steel plant. Despite its exit, cold-rolled steel is still on the CBN’s list of items not eligible for foreign exchange.
The CBN Spokesperson Osita Nwanisiobi alluded that the apex bank was yet to remove the items from the list.
“CBN will always communicate any of their intentions to the public,” he said when asked whether the bank had removed the item from the list.
Aluminium Smelter debacle
A company was once set up to handle the needs of aluminium companies that are also part of the larger steel industry. But politics, intrigues and bad choices pushed it into an intractable quagmire.
Aluminum Smelter Company of Nigeria (ALSCON) was set up in 1997, under the regime of late Head of State Sani Abacha, to explore Nigeria’s 187 trillion cubic feet of gas for aluminium production.
The smelter plant was also to supply basic raw materials such as ingots and billets to local aluminium rolling mills and extrusion plants.
However, the plant has not lived up to its expectation owing to missteps by the Bureau of Public Enterprises (BPE) during the privatisation of the company by Olusegun Obasanjo civilian administration.
The plant was thrown open for bidding during the 2001-2005 privatisation exercise. A Nigerian-American company, Bancorp Financial Investment Group Divino Corporation (BFIG), won the offer after bidding $410 million. However, BFIG was disqualified by the BPE and the offer given to a Russian company, RUSAL, who had earlier bid $205 million for the smelter plant.
Premium Times reported that PricewaterhouseCoopers had valued the smelter company at $3.250 billion, but Rusal paid only $130 million before taking over the smelter plant.
The situation led to court cases from BFIG. In 2012, the Supreme Court ruled that BFIG was the preferred bidder for the smelter plant -eight years after the legal battle.
Up till now, however, the BPE is yet to hand over the smelter plant to BFIG, according to the company. The company is still fighting in various courts to ensure that the BPE respects the court ruling.
BFIG President Reuben Jaja, who spoke with reporters in Abuja in 2020, said BPE “deliberately frustrated BFIG’s attempts to take over ALSCON by altering the contents of the original Share Purchase Agreement (SPA).”
The BPE was yet to reply to The ICIR’s questions regarding the smelter company as at the time of going to press.
While BPE and BFIG fight, the smelter plant is under lock and key. And aluminium companies who are scrambling for dollars to import ingots and billets are the entities suffering.
Nigeria spends $3.3 billion annually on importation of billets, ingots and other forms of steel, according to data from the Ministry of Mines and Steel Development.
Ajaokuta Steel Complex charade
Ajaokuta was set up in 1971 to develop Nigeria’s steel sector and stimulate the exploration of God-given natural resources, especially iron ore. Luckily for the country, large iron ore deposits were found in Itakpe, Ajabanoko and Oshokoshoko all in Kogi State. The Ajaokuta Steel Complex and Delta Steel Company were subsequently incorporated in 1979 as limited liability companies.
Between 1980 and 1983, the then Federal Government stated that it had achieved 84 percent completion of Ajaokuta plant, having completed the light mill section and the wire rod mill.
It was also widely reported that erection work on equipment reached 98 percent completion around 1994.
But the company, which is said to be 98 per cent completed, has not produced a sheet of steel.
Despite being unproductive, government after government has continued to pump billions into the complex. Government records show that successive administrations have pumped over $8bn so far into the complex since 1979. The current government of Muhammadu Buhari has joined the party of spenders on a government facility that needs to be in private hands, analysts say.
The Federal Government budgeted N3.9 billion in 2016 and N4.27 billion in 2017 for the resuscitation of the Ajaokuta Steel Company. It budgeted N4 billion for the steel plant and another N310 million for its concession. In 2020, the government budgeted N4.2 billion for the plant.
The National Assembly, in 2019, approved N118.006 million as Export Expansion Grant (EEG) for the complex, despite that the company does not export anything.
After wasting billions of naira on the steel plant, BPE Director General Alex Okoh said in 2019 that Ajaokuta steel’s challenges were complex and the government was about to fix it. At the moment, the government is shying away from discussions on the privatisation or concession of the steel plant.
Ajaokuta Steel management responds
Sole Administrator of Ajaokuta Steel Abdul-Akaba Sumaila, who spoke through his media aide Muhammad Lawal Ibrahim, told The ICIR that “President Buhari-Putin initiative to bring back Tyazhpromexport (TPE) of Russia, the original builders of the steel plant, to have a holistic technical appraisal of the steel plant for efficient planning was at the key of the present efforts.
“However and as we all are aware, the COVID-19 pandemic and some
legal issues have impacted on the efforts of the government. However, the issues are being
resolved and by the first quarter of next year 2022, Tyazhpromexport (TPE) of Russia is
expected in Nigeria to kick start the process of a technical audit of the plant.”
Defending why the government still spends money on the plant, the sole administrator said the equipment in the steel plant needed to be protected against theft or damage.
“So you need people to man these facilities and the workers do this on shift for 24 hours.
“With a huge network of roads, water supply facilities both for human needs and plants, the level of investment, the need to ensure reduction in dilapidation, preservation and conservation being carried out daily by the workforce became imperative.
“It is because of this continued intervention that we have what we call Ajaokuta Steel Plant
today and it will be a colossal loss to abandon the steel plant because it is not producing
steel by not making budgetary allocations for its sustenance by Government,” he further said.
“When you look at the budgetary provisions of the steel plant, you will see that 95 per cent of the provisions for Ajaokuta Steel Plant is for recurrent personnel who are largely
technical staff trained to manage the steel plant and what is left is for security,
maintenance of over 15 kilometres of power distribution system and its sub-stations, 13
a kilometre of water distribution networks, idle running of over 2650 machines to keep
them alive, environmental sanitation of the steel plant to prevent fire and the steel
plant under-ground drains for the safety of the equipment, security patrols, maintenance of
vehicles for these security and shift duty workers.”
There was, however, no explanation on when privatisation or concession of the plant would happen.
This site uses Akismet to reduce spam. Learn how your comment data is processed.
We need your support to produce excellent journalism at all times.
We need your support to produce excellent journalism at all times.
© The ICIR | All rights reserved.
