50 firms close in 7 years of bad government policies
By Jeph Ajobaju, Chief Copy Editor
Investment in manufacturing has reduced 56 per cent in seven years, and 50 such firms have shut down since 2017, a real sector buffeted on all sides by a plethora of bad government policies coupled with economic headwinds.
Manufacturing firms that have closed shop in the past five years include Surest Foam Limited, Mufex, Framan Industries, MZM Continental, Nipol Industries, Moak Industries, and Stone Industries.
Investment by those still standing has dived south, from N489.44 billion in 2016 to N217.22 billion in 2021, according to data compiled by the Manufacturers Association of Nigeria (MAN).
“How many companies in our sector are still in operation? Wempco has shut down; WAHUM is struggling, and the rest are just there. When we come for meetings, we will not be more than 11,” said Qualitek Industries Chairman Oluyinka Kufile, a major player in the aluminum and steel sector
Kufile blamed a combination of bad government policies, arguing that Nigeria is yet to understand its true direction in economic diversification.
The economy witnessed two recessions between 2016 and 2021. One caused by a foreign exchange (forex) problems, the other by the pandemic.
Economic and financial analysts say federal and state governments have responded poorly to the challenges in the economy.
Insecurity has worsened in the five years, and forex troubles have increased, with naira depreciating 54 per cent, from N197 to the dollar to N425 in the official market over the period.
Federal and state Ministries, Departments and Agencies (MDAs) focus on revenue collection and do not bother to ease business for 41.5 million small businesses and a string of large enterprises.
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Investors skeptical
Lagos Chamber of Commerce and Industry (LCCI) Deputy President Gabriel Idahosa said investment is often driven by policy certainty and the major factors scaring investors are forex market unpredictability and naira devaluation.
He explained that foreign investors are skeptical about investing in Nigeria because the value of their returns would decline in the future due to naira devaluation, via reporting by The PUNCH.
Market analyst Ike Ibeabuchi added that the Central Bank of Nigeria (CBN) is getting the whole blame because the fiscal side is doing little.
“The investment drop is not only caused by foreign exchange, but also by weak policies. The CBN has got it wrong in some areas, but what are the finance minister, the investment minister, security operatives, state Governors and other stakeholders doing to make Nigeria an attractive investment hub?” he asked.
Rising borrowing cost
Global headwinds such as COVID and Russia’s invasion of Ukraine have not helped matters, having induced raw materials scarcity from wheat to oil, and pushed the CBN to raise benchmark interest rate from 11.5 to 14 per cent in three months.
MAN said in an email to The PUNCH that rising borrowing cost would “lead to rising cost of manufacturing inputs, which will naturally translate to higher prices of goods, low sales and enormous volume of inventory of unsold products.
“It will exacerbate the intensity of idle capital assets, worsen the already declining profit margin of private businesses, heighten the mortality rate of small businesses, hurt capacity utilisation, and upscale the rate of unemployment.
“Manufacturers are hopeful that the stringent conditionalities for accessing available development funding windows with the CBN will be relaxed to improve the flow of long-term loans to the manufacturing sector at single digit interest rate.”
