Still a Shaky Future for the Manufacturing Sector

Joseph Ekeng-

For many Nigerians, 2009 is one year they would love to forget in a hurry. Most sectors of the nation had a dismal performance throughout the year, no thanks to the global economic meltdown which largely undermined credit and forced many businesses to close shop prematurely. Till date, the stock market has struggled to shake off the impact of the crunch without any reasonable success and the banks are still whimpering in the shadows of the financial crisis. But one sector that clearly bled the most is the manufacturing sector which had suffered artificial credit squeeze even before the global credit crunch took effect. Between 1999 and 2008, over 820 manufacturing companies closed down due to inconsistent government policies, infrastructural decay, non-availability of power and rise in smuggling activities. According to Boniface Isok, president, National Union of Chemical, Footwear, Leather, Rubber and Non-Metallic Product Employees (NUCFLRAMPE), up to 40 companies in the sector shut their doors in the past one year or thereabout, resulting in over 80,000 job losses. Some of the notable companies that shut down operations in Nigeria include Dunlop Nigeria, Mercury Group and Michelin Nigeria, which shut their production plants and diversified into importation of finished goods.
Some others didn’t shut down completely; they merely toned down their operations due to harsh economic realities. In that category is Nigerian Bottling Company (NBC), makers of Coca-Cola and other drinks, which shut its concentrate supply plant in Nigeria and relocated it outside the country. PZ, another multinational, closed its Ilupeju plant and could also shut down its Aba plant too. Pfizer the pharmaceutical giant, announced the cut of about 8,000 jobs; Caterpillar did likewise with 20,000 employees; Sprint Nextel cut its workforce by 8,000; Philips downsized by 6,000 and Guinness sacked about 100 workers. Smaller industrial outfits are even deeper into the uncertainties in the sector. The federal government is also not exempted; it lost $1.2 billion to the closure of the Soku Gas Plant.
The manufacturing sector, which hitherto contributed over 45 per cent to the nation’s GDP is presently wobbling and fumbling, contributing only a paltry 3.6 per cent to the Country’s GDP Prof. Pat Utomi, Director, Lagos Business School, said.
Indeed, one of the major reasons for the catalogue of failures is poor funding from the banks. The banks, long before the global meltdown, were wary of investing their money in a real sector that is hemmed in by a hostile business environment. According to Prof Simbo Banjoko of the Department of Business Administration, University of Lagos, “The evolving scenario these days, at least before the crash in the capital market, is that the capitalists and banks prefer to advance facilities to clients to enable them invest in securities market. Such clients would in turn ‘go to bed’ and watch their investments multiply overnight without doing anything rather than to invest such money in any SME or so-called ‘risky’ businesses.  This thinking has further weakened the real sector, thereby denying the manufacturing sector the opportunity to generate employment.”  
 But is there a chance that these negatives can turn positive in 2010? Most analysts are not too optimistic and their doubts come from projections that the banks may not start giving credit until late 2010 and even when the loans start going out, it will be in trickles; too small to provoke any fundamental change. According to Banjoko, 2010 is the realistic year for the federal government to inject the N70billion it promised to pump into the ailing textile industry since 2006. He however warned that if inflation and exchange rates keep rising, it will undermine any possible improvement in the sector. “The implication is that manufacturers would not be able to replace their ageing machineries, capacity utilization would further worsen, and there would be a cutback in employment and poverty level would get worse,” Banjoko said.
Other stakeholders urged the federal government to take urgent steps to check some of the fundamental challenges of 2009, adding that if this is not done, 2010 could be worse. Jaiyeola Olarewaju, the director general of the Nigerian Textile Manufacturers Association, called on government to pay more attention to improving infrastructure, adding that there was no way Nigeria will survive without good infrastructure. “Until the country moves from being a generator-powered economy to having stable power supply, there is no hope for the economy and this will keep affecting jobs,” he said.