Ikpong Umoh is the Managing Director and Chief Executive Officer of Stellarchem Nigeria, which manufactures chemicals, machinery, and blow moulding, and is also into consultancy for manufacturers, and more.
With experience spanning over 30 years in the industry, particularly cosmetics, the industrial chemistry graduate has seen it all in manufacturing.
Umoh, who is also the Chairman, Toiletries and Cosmetics Manufacturing Group of the
Manufacturers Association of Nigeria (MAN), says unequal competition orchestrated by global listing policy, regulatory contradictions, and foreign direct investors combine to frustrate local industry.
In this interview with Assistant Business Editor, KELECHI MGBOJI, he argues that so long as Nigeria depends on foreigners to develop the economy, it will remain an economic dwarf despite its huge population and market.
Unequal competition
One competition the cosmetics industry faces is that the Nigerian market is flooded with imported products. A recent research we conducted showed that between 90 and 95 per cent of cosmetics products are imported. Only about 5 per cent are local products.
This grave situation cannot help the growth of local industry. Almost all items on the shelves of supermarket chains are imported. In the attempt to jumpstart the economy, the government has gone all out to look for foreign direct investors. When this happens, foreign investors dictate the terms of their operations.
A super market chain says before we come in, you must allow global listing. We can bring in anything registered anywhere and sell it in your country. What they try to do is kill indigenous manufacture.
Why is it so?
The government has signed a lot of agreements, including the World Trade Organisation (WTO) agreement which says you must not restrain other countries’ products from coming into your jurisdiction; the Economic Community of West African States Trade Liberalisation Treaty (ECOWAS TLT) which says you must not stop any products from ECOWAS country from coming in.
Most countries use high tariffs and other means to reduce importation of foreign made products. This is to sustain local manufacturers.
When the government brings in foreign investors it should consider local manufacturers. Foreign investors primarily want to kill local industry so that they can survive.
Besides, the kind of foreign investors who come into this country don’t bring their finances; they come to look for money.
Indian example
In India for instance, small shops are the backbone of the economy. They employ more people. They have been run for many generations, from father or mother to children; and children handing over to their own children.
At a time, Wall Mart wanted to go to India on retail business. But the Indian government, having looked at what the fate of the local people and the small shops could be, said no’ because if they allowed them, all the local people would have no jobs.
Finally, the government decided that if they are going to come in, they must not operate retail trading. They have to operate wholesale trading. This shows that Indian foreign policy has the face of India.
In Nigeria, this doesn’t happen. No concern about what happens to local investors.
Automobile policy favours foreign investors
The automobile industry policy is skewed in favour of foreign investors to the disadvantage of local companies. Instead of establishing manufacturing plants, investors insist on importing finished vehicles, in form of knocked down parts, and sell before they could generate money to build plants.
The government banned importation of fairly used vehicles more than three years old. These are the kind of vehicles Nigerians can afford. Why don’t foreign investors manufacture and sell at lower prices, and use lower prices and good quality to drive Tokunbo car importers out of business?
Our cosmetics industry, like any other, suffers from this global listing policy. The incoming administration of Muhammadu Buhari should take a quick, critical look at this counterproductive policy.
Buhari should build economy on indigenous production
All countries all over the world are building their economies on local production. But we are trying to build ours on foreign direct investment. It is not right.
Let us redirect the effort we lavish to get foreign investment to reinvigorate local manufacturing so that we can have a sustainable framework.
Building our economy on foreign investment is like a house built on quick sand. Whatever happens in the economy, foreign investors are the first to buy up all the foreign currencies we have and embark on capital flight.
A local investor will not buy dollars in large quantum to take it to anywhere. These things must be checked.
Government should solve power problem
We must restructure so many things on the ground. The local manufacturer and investor are suffering from a lack of electricity. We have been trying to build stable electricity for the past 16 years or thereabouts, and nothing has really come out of it.
Why is it difficult to have a viable electricity generation? The incoming administration must be bold to look at that.
Double regulation by NAFDAC and SON
The National Agency for Food and Drug Administration and Control (NAFDAC) and Standards Organisation of Nigeria (SON) regulate our industry with the same set of principles. This constitutes double regulations.
NAFDAC uses good manufacturing practice to regulate our industry. SON has just come up with a similar framework called MANCAP (Mandatory Continuous Assessment Programme). Our industry is suffering from double regulation.
SON has a mandate to set standards in conjunction with the industry.
Regulatory contradictions
Standards everywhere is a consensus thing. But SON sits down in its office and comes up with a programme and calls it the standard the industry must adopt.
Right now, we are battling SON over MANCAP because it is double regulation. NAFDAC is already doing it, why should SON be doing it also. But they are busy charging money.
The explanation these agencies give is that the government has told them that there are no funds for them and they should sustain themselves on internally generated revenue. That means they are going to have multiple regulations to draw revenue.
We vote for this incoming government on the basis of desirable change. If our votes actually counted and they feel that our members voted overwhelmingly for change, the government should go back to do what it was doing.
Regulatory agencies are funded from tax payers’ money. All over the world, regulatory agencies are not revenue drawing agencies. The government must fund them from tax payer’s money so that they can do their work.
If SON is looking for a standard in the cosmetics industry it should involve the practitioners. It can’t just work up something as standard. We cannot accept that as standard.
Contradictions kill industry
SON tried to foist a similar situation on the cement industry. It took the standard in one company and tried to impose it on all cement companies. The operators are big and have money. So they stood up against it, and SON withdrew.
The new administration should take a close look at SON and other regulatory bodies. They are industry killers. They should not be allowed to deviate from their work which is setting standards by consensus.
People in the same kind of manufacturing should be allowed to come together and agree on the standard. Where there is no agreement on the standard, such a standard should not be set.
Regulators as pawns in the hands of multinationals
We suspect that regulators are being manipulated by multinationals who feel threatened by small local manufacturers, which is why they come up with one regulation after another.
Even NAFDAC is not free from this. Some regulatory requirements NAFDAC has come up with are surreptitious. Somebody somewhere is prompting them. This prompting by multinationals constitutes an anti-trust activity.
Manufacturing requires corrective regulation
NAFDAC started closing down industries, collecting revenue from people and crying foul that there were many fake and substandard drugs in the country. SON came riding on the same campaign of fake and substandard products.
After about eight years of operation, fake drugs, substandard products are still here with us. Some of the drugs and products come from China bearing SONCAP stamp. Who is fooling whom?
We do not have a system that checks the checkers. We should have a system that checks the regulatory agencies. If after many years they are still shouting that there are so many fake and substandard products in the country, then what are they doing; what’s their scorecard?
To reduce fake and substandard products, first and foremost, empower local manufacturers.
If you do anything the regulators consider substandard, the next thing is to slam N2 million or N3 million penalty on you, which is much more than the manufacturer’s profit in two years. How will the company survive?
This kind of regulation is not corrective and can never achieve anything except generate revenue for the promoters.
Nigerian products and export standard
Indigenous manufacturers make products of higher standards than imported ones.
In the 1980s, the cosmetics industry in Nigeria was doing so well that it was looked up to as the cosmetics workshop of Africa and the Middle East.
People used to come from far and near to buy Nigerian cosmetics products. Such names as Kessingsheen, Eleena, and Rainbow were very popular cosmetics, enjoying international patronage.
But when NAFDAC came with its so-called standard, it was not looking for how to improve manufacturing to the next level. It was interested in how to draw revenue.
Companies that did not register products were closed down and people were thrown out of jobs. If they registered their products and failed to renew them, NAFDAC would visit them with a sledgehammer.
Some of the industries are no more; coupled with the fact that the government opened the borders for every imported product.
Other factors in dealing with exports
I have been to China, India, Malaysia and others. You cannot sell matches as foreigners on the streets of India. As a Nigerian, you cannot set up a cosmetics manufacturing company in China. There are so many Chinese companies that manufacture cosmetics.
But here we have a lot of capacity unutilised by local manufacturers, yet allow so many foreign companies to bring in cosmetics products.
Local Content Act and industry issues
The Local Content Act was enacted to ensure local content in the petroleum industry. This implies that the personnel occupying certain positions must be local people. But it does not stop there.
The real local content that will salvage this country is one that ensures that local industries that are active and functioning and new ones are allowed to enter the industry.
If the government wants foreign investors it must consider where the country has expertise and competence. If a Nigerian group has expertise and competence in any area, foreign investors should partner with the local company.
This is what India has done. The car companies coming to India are not coming to operate alone.
You hear certain names like Suzukimaruti. Maruti is an Indian company that has been trying to assemble cars for a long time and Suzuki came in to partner with them. Then Ashokleyland. Leyland came in and was forced to partner with Ashok to transfer technology.
Foreign investors should partner local vehicle firms, not to compete
Foreign investors coming to Nigeria should have partnered Innoson Vehicle Manufacturing Company or Debongos to transfer technology, not to competite with them.
The government exposes our local companies to unnecessary competition. How can they grow?
The incoming administration should learn from the mistakes of the past and lay emphasis on local manufacturing. Anything made locally should not be imported, despite the treaties the government signed. The U.S., United Kingdom, China, and India signed all those treaties.
China was going to whitewash America with it steel but the American government gave conditions. It told China to pay higher duties and gave a limited quota if it wanted to bring its steel products into the U.S.
When China saw that it was not feasible to operate on those conditions, it backed down.
About six years ago, the British American Tobacco Company (BATC), a division of Craft Foods, was coming into this country. It was boycotted because it manufactures cigarettes that endanger the lives of smokers and unborn babies.
The company moved from America to Vietnam to manufacture. When the Vietnamese discovered that tobacco smoking was killing their young population and unborn babies, they drove BATC out.
A Nigerian went and brought the company here and perhaps put his child or brother as a director. And that was counted as Nigeria’s foreign direct investment. A company bringing poison to your country, and the same NAFDAC gave it certification.
