How border closure is affecting Nigerian businesses —Ajayi-Kadir, DG, MAN

The Director General of Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi-Kadir, in this interview by Akin Adewakun, bares his mind on the continued border closure by the Federal Government; xenophobic attacks in South Africa and the AfCFTA, which Nigeria just signed. Excerpts:

 

How would you assess the performance of the nation’s real sector in the past two quarters?

I think the year started on a fairly positive note. The last two quarters have not experienced any unforeseen negative trend. What we have seen is a marginal improvement in the capacity utilisation of our members. But that is not to belittle the effects of a little bit of delay in announcing the ministers and their portfolios, and the fact that government being a major spender and government activities being the mover of the economy, resulted in the lull experienced in the sector. However, businesses are tuning up. The expectation that we will soon be confronted by competition from AfCFTA has led to some business calculations, from what I heard from CEOs, as to how to take advantage of the market. Government has also made known its intention to continuously support manufacturing. However there are some signals that tend to get us worried. The plans to increase excise duties on some products, especially tobacco and alcohol, has created some anxiety. What we are saying is that the timing is not right, especially in the case of tobacco, where there is not corresponding increase or imposition of excise on imported brands.  So, what we are likely to have is that we are creating an environment that imported products will be more price-competitive, thereby jeopardising the local industries. I think there is need to actually prevail on the Ministry of Finance not to transit to the second tranche of increase in excise on tobacco and wines. It’s extremely important that government does that.

Also we’ve had apprehensions about increasing the list of the items not valid for foreign exchange. Whilst we support government’s efforts at backward integration, which we call ‘resource-based industrialisation’ in MAN, we say that there has to be caution, there has to be a process. There is the need to sit down with relevant stakeholders, so that we can determine how to progress in that direction. If you do not take them along, you’ll be scuttling their projections and you may be creating artificial scarcity, because in some of these cases you would have the situation where they are not locally available in the right quantity, and even if you are going to incenticise their production or their local availability, it has to be done over a reasonable period, which we enjoy the cooperation of both government and the private sector operators. So, by and large, industries are looking forward to brighter future. The ease of doing business should now fully be on course, especially the elevation of the secretary to the level of senior adviser to Mr. President. So we expect that that would give her more presence in terms of effects, and we look forward to a reduction in cost of doing business. Another issue that has disturbed us is the recent increase in electricity tariff. Amidst dwindling supply, you are having an increase, to the extent that we are not certain that this will lead to an increase in supply. It is not a welcome development. There should be a corresponding improvement in supply before you can make any justification for that.

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Now that Nigeria has signed the African Continental /Free Trade Agreement (AfCFTA), what exactly is in it for the nation’s real sector, the economy and the common man on the street?

Like we said at the onset of the debate on AfCFTA, trade among nations always has its up and down. You cannot always have it your way. You win some, you lose some. But what you should just ensure is that you win more than you lose, and you find a niche  for yourself where you can play, and you concentrate on it to achieve success. There are opportunities in the N1.2bilion market. But those opportunities can only be actualized, if we do a number of things. Those things that,  principally,  have to do with removing the supply side constraints, that  you have internally, so that you will be able to optimize your production capacity, you’ll be able to produce at a price that is competitive, and you’ll be able to export. So the advantage in having a market can only be realized when you can fit the market with your products. So, how price-competitive are we in terms of production? What are those factors that are limiting our capacity? I believe you cannot win in a race where you have your hands tied. It is going to be very difficult for you. So there are opportunities in manufactured goods, there are opportunities in service, there are opportunities in entertainment, but you see, all these come at a cost that has to be better than the other one. Otherwise, since the continent has turned into one market, you have products coming  in and out from all countries, so you have to be competitive to be able to seize the advantage.

 

Some have raised concerns about the nation’s market being turned into a dumping site? How do we allay such fears?

I think it is for us to do the right thing. Apart from the people coming in illegally, smuggled products, but for the real imports, if the product here is cheaper than the one coming in from Kenya, South Africa or Cote D’Ivoire, nobody is going to buy the foreign ones. Somebody has to make an economic decision, which one best fits, my disposable income. That’s the rational decision one is going to take. So we need to boost productivity, we need to improve our infrastructure we need to remove those constraints that have made us not to be competitive and limited our production capacities. We have highlighted several hurdles.

 

The nation’s borders have remained closed for some weeks. What are the likely implications of or/effects on some of your members, the average Nigerian and the nation’s economy?

We understand that it’s for security reasons, and also for economic reasons because there have been influx of goods into the country. So government took the wise decision in closing the borders. We have however intimated the government with the negative economic consequences of such an action and it’s receiving government’s attention. And the way that we’ve acted is that  some of our members that have formed production network around West Africa, especially, this is being constrained by this closure. We are hoping that it will be quickly resolved. We do not say government should put our security in jeopardy. What we are saying is that it should take a pragmatic look at it and let us find that fine strategy that will allow economic activities to thrive in a secure environment.

 

Some have also raised concerns that the ongoing xenophobic attacks in South Africa might sound the death knell of the AfCFTA? How real are these concerns?

Absolutely, they are real. There is no doubt about that. For instance,  a lot of people are already imagining how businesses worth millions of dollars could be destroyed in a country that is open for business. South Africa is a signatory to the AfCFTA, just like Nigeria. Now that Africa has taken a new turn in terms of trading among itself and integrating its economy, we now have this very unfortunate and actually mind-boggling attitude  from South Africa, that together with Nigeria are leading economies in the continent. So if you would do this to Nigeria, what lessons are you sending to the smaller countries about their safety, and about the safety of their investments and the sanctity of the contracts that they might have entered into in those countries? It is sending a very bad signal and I think AU has to do something, hurriedly, so that these retaliatory measures are not also escalated, because if you do an eye for an eye, very soon, the whole world will go blind. It’s actually unfortunate, and what has worried many people is the fact that the condemnation from the South African government was late in coming, and in some cases, not as stringent as one would have imagined. But, it is good that the president himself has come out to say that it is unacceptable.  I’ll just urge that they put actions to their words. There is the need to rapidly bring this under close. Those who have been making reckless statements should be called to order. Some of these reactions are probably based on what some of the leaders have said. They must be able to rein in the perpetrators of this heinous crime against brother Africans. It’s quiet unfortunate.

 

The influx of adulterated products into the nation’s market still remains a challenge. Is there any mechanism put in place by MAN to protect your members and also tackle this?

What we have done is to support the agencies whose primary responsibility is to check round-tripping and untoward trade activities. We, for instance, have a very close working relationship with regulatory agencies, such as, SON, NAFDAC and Customs. Our members are able to provide intelligence information as to the movement of goods. We also cooperate with them in terms of facilitating the implementation of measures that are designed to checkmate smuggling and influx of goods that compete unfairly with us. The dangerous thing about counterfeiting and so on, is that we even have similar products being imported into the country and the name of the company is there, and the composition of those items cannot be vouched for. And it’s more dangerous in medicine, where you have people faking our members’ products, and they bring it into the country and when they are subjected to laboratory tests, you discover they are substandard. This can deal a very bad blow on the business of our members and we have seen instances where this has happened. So we can only ask also that government should equip our customs more effectively. But, you know, no matter the number of customs that we have, Nigerians must recognize the danger they are doing to the economy, the danger they are inflicting on fellow citizens, especially those ones that are life- threatening, and have a change of heart. You see when we all complained of insecurity and so on, it’s traceable to the lack of profitability of businesses, which normally leads to downsizing and others. So there is need for government to step up activities in checking the role of these economic saboteurs, dealing a heavy blow on the performance of the manufacturing sector in Nigeria.

 

Now that President Buhari is gradually settling down for his second term in office, what should be his area of focus, this time around?

He’s not new in the saddle; this is his second term, as a democratically elected president. And there have been several measures that have been put in place during the first tenure. For instance, the ERGP, the Ease of doing business, and others. For instance, what we’ve said is that the Ease of Doing business has succeeded in some ways, in terms of making the process simpler. We want to see that result in winding down of costs of doing business.  He should also ensure cooperation between ministries, departments and agencies of government. This is extremely important. In recent times we have seen some of them working at cross-purposes. I think there should be better coordination. And the ministers and the appointees of government, themselves, should consciously work together since it›s the same administration. Again, the regulatory agencies should not see themselves as tax collectors or gatemen, or tax masters. They should facilitate business. They should play their roles to encourage, and not literally stand with a whip, with the intention of whipping everybody into line. They need to empathise with businesses, especially in these very harsh times.