Victor EzejaAs reactions trail the recent decision of some foreign companies to stop production in Nigeria and resort to import, there are concerns that it would have a more long-term impact on the economy.
Director General, Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, said while Nigerians are lamenting about the immediate impact of their foreign companies’ exit on jobs in the country, they should be more worried about the effect of their new import-based business model on local manufacturers.
According to him, they would import from economies that have relatively low costs and flood the market to compete with the ones made locally under high production costs.
Recall that some foreign companies like GlaxoSmithKline (GSK), Sanofi, and Procter & Gamble (P&G) recently announced the decision to stop production in Nigeria and resort to importing their products from their companies abroad. They cited challenging economic conditions which has made it difficult for them to continue operating in Nigeria.
Prime Business Africa understands that a lot of multinational firms that are dollar-denominated are facing the challenges of repatriating forex. They, together with domestic ones are equally bedeviled with multiple taxes, high energy costs, and a couple of other factors that affect the cost of production.
READ ALSO: Big Pharma Companies’ Exit Further Pushes Drug Prices Up As Imports Rise By 68% In Nigeria
The DG of MAN stated that the exit of these foreign companies is quite sad but not unexpected due to challenges in the business environment. He pointed out that the government has not created an enabling environment for businesses to thrive.
“The exit of GSK and P&G is news because they are big foreign companies with many years of presence in Nigeria but what about many local ones that have closed,” Ajayi-Kadir stated while featuring on Channels Television Sunrise Daily on Monday morning.
While decrying the high cost of doing business in Nigeria, Ajayi-Kadir expressed concern that the foreign companies resorting to import business models would create more troubles for the local indigenous manufacturers producing similar products.
“When the import is prioritised, you create jobs outside and unemployment inside. So, let’s say there is an avalanche of imports of those materials, it is just going to subsume the ones produced locally and I think it is more worrying for jobs. We wouldn’t have only lost the ones for P&G, we should be preparing for the ones to be heavily impacted by their imports.”
He called on government to take clearly defined measures to prevent more from happening.
He emphasized that for Nigeria to be an industrialised nation, it must take deliberate measures to remove constraints in the business environment.
“Government has a responsibility to make the environment conducive for business.”
FG’s N75bn To 75 Firms, A Drop In Ocean
The DG of MAN reiterated that the N75 billion proposed by the Federal Government to be disbursed to big manufacturing companies in the country is like a drop in the ocean.
Tinubu had some months ago, disclosed plans by the government to offer loans of N1 billion each to 75 big companies at 9 per cent interest rate from July 2023 to March 2024 as part of the Federal Government’s palliative measures to cushion the effect of petrol subsidy removal on firms.
Ajayi-Kadir stated that the money is grossly inadequate but a step in the right direction of offering credit to industries. According to him, MAN has more than 2,500 registered members.
He said that even though the government is yet to give more details about the disbursement, he would advise that the credit be given to companies with high potential to create jobs and those with high capacity to export as well.
“It will be good for us to focus on those with high capacity to generate jobs and also sectors tied to alleviating poverty and making foods available to the people which will boost the value chain in the food and beverage sector,” he stated.
He maintained that N75 billion may not be adequate for one big manufacturing company but in the food and beverage value chain, it may have some level of positive impacts. “The impact would be immediate when channeled to SMEs,” he added.
He also mentioned that even the 9 per cent interest rate offered in the loan is not adequate, adding that their members are asking for 5 per cent.
Tinubu’s Quest for FDI
Commenting on President Tinubu’s ongoing quest to attract Foreign Direct Investment (FDI), Ajayi-Kadir observed that it is necessary to first deal with the challenges faced by existing investors which new ones would come and encounter.
He also commended Tinubu for setting up the Presidential Committee on Tax and Fiscal Policy Reforms, adding that if the policy recommendations are implemented, it would yield positive results by ensuring transparency, and accountability in tax collection and increase government revenue from that part.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
Follow Us