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Nigeria helpless over exodus of companies

Page last updated at Thursday, October 29, 2009 9:09 AM // 1 Comment

Companies which cannot take the heat in Nigeria are leaving in droves to other countries. The implications are massive unemployment and resurgence of criminals as well as social vices, writes JOE ADIORHO.

THE relocation of many firms from Nigeria to neighbouring countries and beyond is gradually and steadily ruffling the nations’ political, economic and social feathers. As at the last count, over 800 firms in the grades of multinationals, service providers and manufacturing of big, medium and small scale levels have fully or partially shifted their bases from Nigeria to countries such as Benin, Togo, Ghana, Cote d’Ivoire and even as far as South Africa. And the manifest de-industrialisation trend in the country has raised the corporate fatality figure to precisely 857.

The departing firms and even those aspiring to leave believe that they have cogent reasons to shift and they flaunt it. They complain of high manufacturing costs, which reduce the competitive value of their goods in the international market.

Coca-Cola Nigeria, in September, relocated Nigeria’s only concentrate factory from Ogun State to Switzerland, because of high operational costs, which made their products unable to compete effectively at the export market, even in the neighbouring West and Central African countries.

Adducing a reason for their departure, the firm said: “The country’s manufacturing situation has made the plant’s operations unsustainable in the light of today’s global economic realities because the company had only been producing for the Nigerian market alone”.

There are still echoes and rumours of many more firms at the verge of departure from the country.

The National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), blue chip companies like Paterson Zochonis (PZ) and Unilever have already moved or are in the process of moving their operations out of Nigeria to Ghana. Earlier, two giant tyre manufacturers, Dunlop and Michelin, had closed shop, due to unfavourable business conditions.

The total investment of the firms that have moved to Ghana, according to experts, is over $20 billion. Unilever Plc and PZ Cusson Plc have divested to Ghana due to their huge overhead cost arising from poor power supply.

Nestle Nigeria Plc, on its own, has moved its research unit and regional head office to Ghana due to huge production cost from power outages, which have eaten deep into its financials. Further findings revealed that fear of not being able to meet up with shareholders’ demands in terms of dividends payout necessitated the movement of most firms that did not make public such exit. Although some of these industries already have branches in Ghana, the fact today is that the Nigerian business environment is completely repugnant to the normal growth of any business enterprise.

Indeed, Nigeria’s quest for economic base diversification through improved non-oil exports may soon be threatened going by this wobbly performance of the real sector.

For instance, in the first quarter of this year, the nation was only able to realize $413 million from non-oil export business, against $517 million achieved in the first quarter of the corresponding period last year. The unavailability of data by the nation’s statistical body has made it difficult to know the situation of things currently.

The rumour of Lever Brothers’ relocation was so rife that its Managing Director, Thomas Boedinger came out to dispel the rumour and restore confidence.

Boedinger disclosed that despite the inclement business environment of the country, Unilever would continue to work in such a way that would continue to impact positively on the operating environment since its Corporate Social Responsibility (CSR) policy demands that they should help to build the country by contributing their quota.

“We have much faith in this country and this is a major reason why we are developing our Nigerian operations as the source for detergent powders in West Africa,” he said.

Recently, the firm invested over N3.5 billion in setting up a detergent factory in Agbara, Ogun State and an additional capacity to its existing factories. These investments, the firm’s boss explained, were a demonstration of the company’s belief in the future of the Nigerian economy.

For a number of years, the Manufacturers’ Association of Nigeria (MAN) had raised strident alarms on the stifling and oppressive atmosphere in which business is done in Nigeria, but successive governments typically turned deaf ears.

Now, the loss of Nigeria has turned to gains for countries like Ghana, Sierra-Leone, and The Gambia, which have offered safe haven for the retreating firms. Ironically, while multinational manufacturing operations are moving out to smaller countries with more reliable infrastructure, Nigeria with its huge consumer population still remains the target for the finished goods. The tragic difference is that we will become a net importer of these consumer goods hitherto manufactured here.

MAN president, Bashir Borodo, believes that, “not all companies will leave.

“Most of the companies know the advantage of the Nigerian population to market their products; though it is sad, but we believe there is hope. We have been pleading with the government to act fast in restoring the power sector. With an effective power sector, more companies will come in instead of moving out. The government needs to get serious in restoring power and infrastructure,” he said.

The combined effect of all these have an impact on the sector’s contribution to the nation’s Gross Domestic Product (GDP), which is now 3.6 per cent as at last year, down from 4.04 in 2007.

Borodo said the current trend in the sector is having a negative impact on the work force as more people are losing jobs daily.

Currently, the real sector is thriving on imported products, which have overrun the locally made. With most of the goods coming with low price regime, the made-in-Nigeria ones can barely compete, thereby contributing to the already high rate of industries’ mobility.

It has become almost a clich to complain about Nigeria’s power problems, but that is what the companies’ chief executive officers (CEOs) finger as the main reason for their migration, citing concerns like infrastructural decay, poor tariff structure, corruption, growing insecurity, and some others.

The CEO of HenryJvaleens Limited, Henry Ejike is no longer bothered by the number of firm that have left the nation’s shores but more concerned with the implications of such moves to the nation’s economy and the citizens.

He said: “Even though job loss is a significant part of the negative effect, it goes beyond it. You have to look at the human capital that will be declared redundant and retrenched and the resources that they are taking away…the funds from the economy. Their departure creates pitiable situation for the youths of the nation, indirect tension, poverty and crimes.

“Consider the signals that it is sending to in-coming investors. The in-coming investors get to know why others are relocating. That tells you that something fundamental is certainly wrongly.”

Ejike said that what we should do is to put in place the enabling environment to attract investors and not to create repelling conditions like non-availability of energy and multiple taxation.

“I understand that Ghana has a lot of incentives it offers manufacturers. But in Nigeria, we generate a great deal of obstacles that even lead firms to declare losses at the end of the year”.

He says unemployed restive youths should not be blamed at all.

“When you employ someone, it is not only that individual that you have taken care of in the African context, you have taken care of over 10 dependants.

“It is the absence of companies and the departure of the available ones that created the idleness in the Niger Delta that metamorphosed into militancy.

“This is not the life the militants had planned to live. They were forced into it by the prevalent circumstances of no jobs and no laid out plan by the government to take care of the rising population,” he said.

Ghanaian president, Prof. Atta Mills, had, during a recent visit to Nigeria, promised to provide a level playground for Nigerian and other foreign investors who are willing to come to his country.

To the problem of relocation, Nigeria’s Minister of Commerce and Industry, Chief Achike Udenwa said recently that the problem was not as bad as was being painted by critics of the government. He assured that the power sector problem would soon be fixed.

Borodo said that facilities such as power, good roads and security were advantages Ghana was exploiting to induce Nigerian investors. He noted that Ghana was taking advantage of the Economic Community of West African States (ECOWAS) Trade Liberalisation Scheme (ETLS) to attract Nigerian firms and make Nigeria a dumping ground for their finished products.

Three recent international reports by the Global Competitiveness Index placed Nigeria 148 out of 196 countries in terms of conducive environment for business.

Another report, Doing Business in Africa, ranks Nigeria as the eighth worst country for investment in the continent, while Ease of Doing Business Report, rates Nigeria as the second most difficult country to do business, globally.

The president of Lagos Chamber of Commerce and Industry (LCCI), Asiwaju Solomon Kayode Onafowokan, noted that lack of political Will to implement economic reforms had made the country a dumping ground for many foreign goods. He stressed that many firms operating in Nigeria already had Ghana as their operational base and Nigeria as warehouse. The LCCI boss said the new development would increase the unemployment rate, cause retrenchment and increase the national poverty level.

Cletus Uchend, the chairman of the Mega Palm Chemical Company, Abuja said that it is painful that Nigeria is fast assuming the unenviable reputation of being a burial ground for big businesses, particularly those in the real sector.

“One thing you cannot miss on your visit to Nigeria is the presence of varying sizes of power generators. The core of the matter is simple: Nigeria’s power generation is less then a quarter of its electricity needs”.

Joshua Okwuolise related how he was almost murdered because of his generating set. “The head of an armed gang that broke into my house told me that he had the desire to waste me because I was using a generator.”

According to him, the robber told him that because of our high patronage of generating set, Michelin left this country and he lost his job and his wife and picked up a job as an armed robber. Since that day, I realized that there are negative and positive implications to whatever we do or failed to do,” he said.

He then called on government to urgently deal with the issue of power supply.

Source: The Guardian

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Comments

1 Comment

  1. abiola says:
    November 11, 2009 at 9:53 pm

    give me the total human capital as at 2000-2009

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