Harsh Operating Environment Forces Companies In Nigeria To Close Down
The Nigerian Chambers of Commerce has said that less than 800 companies closed shop in Nigeria between 2009 and 2011, due to the harsh operating business environment.
The companies that have survived are also having serious challenges as more than half of them have been classified as “ailing.’’
According to the News Agency of Nigeria, NAN, this was disclosed by the President of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, NACCIMA, Herbert Ajayi, on Tuesday, in Asaba, in a paper he presented at a zonal workshop on economic diversification organised by the Revenue Mobilisation Allocation and Fiscal Commission, RMAFC.
Mr. Ajay said the current situation of the “surviving” industries poses a great threat to the survival of the manufacturing industry. He added that capacity utilisation in industries hovers around 30 per cent and 45 per cent on the average, with 100 per cent overhead costs.
He blamed the continued decline in the manufacturing sectors on “political and economic factors’’, citing poor infrastructure and epileptic power supply as key impediments to the industry.
“The manufacturing industry as a whole operates on more than 70 per cent of energy it generates, using generators; and operating these generators greatly increases the cost of manufacturing goods,’’ he said.
The industrialist gave other reasons for the woes in the sector as incessant increase in the price of petroleum products used by industries, multiple taxation, unabated smuggling and inadequate access to finance, both local and abroad.
He said widespread insecurity and the inability of government agencies in the ports to meet their 24-hour target, for cargo clearance, have contributed to the dwindling fortunes in the manufacturing sector.
The NACCIMA president, whose speech was delivered by the Vice President of the association, Mary Iyasere, described current government policies to revive the manufacturing industry as inadequate.
“For instance, in May 2010, the government announced a 1.3 billion-dollar fund to help banks extend credit to the manufacturing sector following the decline in available finance after the global economic crisis had set in.
“Notwithstanding this positive development arising from the reform process, the Nigerian economy, especially the manufacturing sector is still confronted by serious challenges, structural imbalance and lack of diversification,” he said.
“The current government policies targeted at the real sector (manufacturing) are also inadequate and preventing the manufacturing industry from flourishing,”he added.
On the way forward, Mr. Ajayi stressed the need for the organised private sector to support the government’s efforts to revitalise the sector through the much-canvassed public private partnership.
He also called for more transparency in the ongoing government-led privatisation exercise of public enterprises.
Quoting statistics from the Bureau of Public Enterprises (BPE), Mr. Ajayi said between 1999 and 2011, a total of 121 firms were privatised or commercialised, with about N250 billion realised from their sale.
“It was also reported that 81 of the privatised firms were operating at about 66 per cent and 41 at 34 per cent performance level,” he added.
The NACCIMA president, however, observed that the figures are in stark contrast to the position of the Senate ad-hoc Committee on Privatisation, which posited that 80 per cent of the firms are not performing.
In addition, he said Nigeria can borrow from the lessons of the economic policies of the “Asian Tigers” — Hong Kong, South Korea, Singapore and Taiwan — to boost the manufacturing sector.
He, however, warned that Nigeria must exercise “caution” in trying to imitate the Asian policies. He explained that government needs to consider the peculiarities of the nation’s economy and marry it with those of Asia in areas “where policies are applicable rather than wholesale adoption”.
“This is because the casualty between growth and industrialisation could prove to be a costly mistake as seen in other countries, in pushing for rapid industrialisation,’’ Mr. Ajayi stated.