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How collapse of key industries affects Nigerian economy - BUSINESSDAY

NOVEMBER 14, 2017

The Nigerian economy is currently feeling the pinch of the collapse of major industries of the 1970s and 1980s.

Nigeria has become one of the biggest tyre importers, thanks to the collapse of Michelin and Dunlop in 2007 and 2008 respectively. These firms collapsed owing to power failure, smuggling of second-hand tyres and policy flip-flops.

The country is now creating jobs outside its shores and growing other economies, while it languishes in economic slump caused by near-collapse of the real sector and overdependence on minerals.

Since 2013, non-oil export value has not exceeded $2.97 billion annually and has been on the downward slope since, Real Sector Watch’s data, obtained from the Nigerian Export Promotion Council (NEPC), show.

Prices of tyres doubled last year owing to foreign exchange volatilities that hit many firms hard.

Dunlop Plc is still in Nigeria but it now operates as DN Tyre and Rubber Plc, joining traders to import tyres into Nigeria from Spain and South Africa.

Due to high prices of new tyres, importers are now bringing in fake and substandard products, which recently caused the death of Nigeria’s Minister of State for Labour and Productivity, James Ocholi and a family member.
Ede Dafinone, chief executive officer, Sapele IntegratedIndustries Limited, a key crumb rubber processor, does not see Michelin and Dunlop setting up plants in Nigeria again, owing to Nigerians’ penchant for used tyres, as well as low rubber and tyre prices in the international market, and shortage of lumps from trees.

In the 1970s and 80s, Nigeria had brake pads and lining manufacturers such as Feredo and Exide in Ibadan; Mintex in Kano; Fenok in Onitsha; Apex in Lagos; Edison in Nnewi; Uko in Onitsha, and Ibeto in Nnewi. These firms collapsed in the 1990s, owing to policy inconsistencies, especially on import, say experts.
In 2015, the only surviving brake pads and lining maker Star Auto Industries collapsed as it was unable to compete with cheap Chinese products and could not pay back loan borrowed from the Bank of Industry.
“It is difficult to compete with Asia, with substandard, cheap brake pads. I am not happy that import duty on brake pads fell from 25 percent to 10 percent. This is the situation since 2004 and government has done nothing about it,” CEO of the firm Chidi Ukachukwu, told BusinessDay in early 2014.

Today, palm oil prices are rising by the day due to 700,000 metric tonnes gap in the industry.

Adapalm Plantation is a typical example of how a state held onto a facility that could easily have been privatised. This facility was set up by the then Michael Okpara administration of Eastern Region, but the company is today overgrown with weeds, with the state government failing to privatise it to achieve efficiency.
Experts attribute the demise of Okitipupa Oil Palm Company Plc (OOPC) in Ondo State to corruption and bad management. The situation is not different from the Ore-Irele Oil Palm Company Limited and the Araromi-Ayesan Oil Palm Plc, both of which were partly state-owned, with over 13,000 hectares of land.

Despite Okomu, PZ Wilmar and Presco ramping up production, local demand is still high and middlemen sometimes create artificial scarcity to make money.

About 820 firms closed shop in Nigeria between 2000 and 2008, said Bashir Borodo, former president of the Manufacturers Association of Nigeria (MAN). Youth unemployment in Nigeria is nearly 50 percent while the country is considered a dumping ground for all products.

 

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