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130 firms closed shop — MAN

The Manufacturers Association of Nigeria (MAN) has encountered numerous challenges ranging from deteriorating infrastructure in the operating environment to deepening weak domestic demand arising from lack of consumer purchasing power. As such, many manufacturers doing business in Nigeria are forced to move part of their operations to other countries, while others without the financial capacity to stay afloat in business are simply going under. The Vice Chairman, Toiletries and Cosmetics (T&C) Group of MAN, Mr. Ikpong Umoh, speaks on the hardship facing operators of Small and Medium Enterprises (SMEs) in the country and how 130 manufacturing firms folded up in few years.

In advanced countries Small and Medium Enterprises (SMEs) play a major role in economic development. Why is Nigeria’s situation different as many operators of SMEs are either going under or moving their businesses to neighbouring countries in the sub-region?

In developed economies, the roles of SMEs are to enhance economic growth and development, which are rightly regarded as the engines of growth in the economy. The roles of SMEs are seen through income and employment generation, leading to better standard of living, reduction in poverty and unemployment. For instance, in the 90s, the T&C industries in Nigeria witnessed growth, relative stability and expansion. Products made in Nigeria were in high demand throughout the West African sub-region and beyond. Most local manufacturers sited sales offices and depots in some African countries like Kenya, South Africa, Ghana and Gambia in order to adequately service the increasing demands in the region. Some extended their reach beyond Africa to Europe, especially Britain, France, Italy and America to service the black population residents. The trans-continental presence of Nigeria cosmetic products was achieved through networking, corporation and alliances involving reputable distributors and warehousing agents.

At that time, the number of T&C companies in active business were over 155 with all of them owning and operating manufacturing facilities in Nigeria. This is not to say that there were no foreign made products in the Nigerian market. There were however a few companies from US that brought their products to Nigeria but their impact was dwarfed by the overwhelming dominant market share of Nigerian cosmetics and consumer preference for the home made products. The same preference for Nigerian made products outside of our shores increased the demand in neighbouring countries, as Nigeria was seen as the cosmetic workshop of Africa supplying mainly hair care and skin care products.

The research conducted by Euro-monitor in 2011 showed that there was enormous growth of about 200 per cent in the cosmetic industry in the last 10years. Given the growth scenario, one would have expected local cosmetic companies in Nigeria to consolidate their market leadership at least in the West African sub-region and to blossom even more in line with this growth rate. But this is not the case as majority of these firms established in the 90s are folding up. Today, the T&C Manufacturing Group has less than 25 members nationwide, down from over 155 members in 2,000 fiscal year.

What are the major problems militating against the growth of manufacturing industry in Nigeria?
Continuing harassment of companies by some state and local governments over unauthorised levies and charges in spite of the clear position of the law on the matter, non completion of the development of core industries particularly the petro-chemicals as wall as Iron and steel firms, dearth of qualified skilled middle level manpower worsened by the decaying education system, slow rate of technology acquisition stemming from low investments in research and development. Others include unfair competition tactics/manipulated tariff, lack of government’s protection, massive and unbridled importation of finished cosmetic products into the local market despite the fact that we have unutilised capacities in most of our T&C companies, multiplication of regulatory agencies, high cost of funds arising from depreciation of the Naira against major currencies coupled with high lending rates, extreme difficulties in accessing credit for working capital particularly by small and medium scale industries among many others.

For the manufacturing sector to achieve tangible growth, we must work together to give small businesses an operating environment in which they can thrive. Small businesses are disproportionately affected by government regulations and paperwork. We should regulate only where there is real need, fully justified through rigorous cost-benefit analysis and clear legal authority. When government regulates, it must adopt common-sense approaches because regulations work best when agencies anticipate and analyse effects of their proposals on small firms. The rules need to reflect the ability of small businesses to comply.

What are the economic implications of the declining rate of SMEs in the country?
The net effect of this free market occasioned by government’s refusal to protect industries dominated by SMEs via the inclusion of its finished products on the prohibition list are job losses, high mortality rate of T&C industries, abject poverty and prevalent unemployment in our economy. The import prohibition list was introduced by the Federal Government and aimed at preventing importation of products, which could be manufactured locally in the country.

There has not been any major new entrant into this industry in the last 10years or more. Rather, there have been closures as witnessed by the active list of T&C member companies since 2001. The multiple effects of high handed regulation and high regulatory tariffs have raised the entry barriers into the industry for many entrepreneurs. Nigeria ranked 147 among 189 economies measured in the report entitled understanding regulation for small and medium-size enterprises. The country is also not listed among those governments in sub-Saharan Africa that significantly stepped up it pace of improving business regulation and encouraging smaller businesses to thrive. Rather World Bank report listed Republic of Benin, Burundi, Cote d’Ivoire, Guinea, Guinea-Bissau, Liberia, Rwanda, Sierra Leone and Togo among 20 global economies found to have improved business regulations since 2009.











Source: Vanguard




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